Yovich & Co. Weekly Update - 2 July 2012

Jul 2, 2012 | Commentary

This Week's Themes

  • Developed markets were relatively strong, continuing the recovery from the lows in early June and the uncertainty surrounding the Greek elections. The outcome form the EU Summit was positive with suggestions that Germany is going to move from their hard-line stance.
  • The Australasian markets have not recovered as quickly with high exchange rates making local exporters uncompetitive and inhibiting future growth in export related industries. The New Zealand Dollar closed above 80 cents US for the first time since May.
  • With the exchange rate where it is and European markets being priced at historically low levels, this presents an opportunity to buy European equities. One way to get broad diversified exposure is to use Exchange Traded Funds. If you are interested in investing in Europe, contact us.

Company News

It was a slow week for company specific news although the Bank for International Settlements published their annual survey ranking the Australian Banks as the most profitable in the world. This reiterates our view that investing in bank shares is a good way to increase yield.  Dividend yields are forecast over the next few years to be between 6 & 8 percent, while in the U.S. & Europe, bank yields have been 2.5% & 4.5% respectively. Below is brief summary of the 4 big Banks.

Other News

  • The Reserve Bank of New Zealand has announced that Graeme Wheeler will be the successor to Alan Bollard as the RBNZ Governor.
  • The Assets Sales Bill was finally passed by Parliament last week although there is still strong opposition. Expectations are that Mighty River Power will float in September and that the subscription will be over booked by strong demand.
  • Looking forward to this week it will be interesting to see the outcome of the Fonterra GlobalDairyTrade Auction. This may signal that commodity prices have stabilised after a period of price falls. The Reserve Bank of Australia has their interest rates decision announced on Tuesday.

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Jarrod Goodall



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