Director’s Cut -- Resources sector growth stands out ::::Macquarie Research,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Director’s Cut
Resources sector growth stands out
As expected, Ben Bernanke did not foreshadow a QE3 at Jackson Hole. While
he made it relatively clear that fiscal policy was needed to address demand
issues, if US economic data remains weak we are likely to see even more QE3
speculation prior to the Fed’s now extended September meeting.
Still on monetary policy issues, Paul Cavey’s latest note highlights the policy
uncertainty in China, which appears to be suffering some of the indecisiveness
apparent in the world’s major economies. While there is a risk China could over
tighten, Paul believes a policy moderation is more likely in the next few months,
with market-led rates falling. This would be positive for commodities, although
prices have performed well relative to equities in recent months, which suggests
the market is not anticipating over-tightening in China.

The positive outlook for China is reflected in the earnings growth outlook for
Australia’s resources sector. After the 3rd week of reporting season, Tanya
Branwhite says the FY12 EPS growth forecast for Australian resources now
stands at 37%. This is down a little on the pre-reporting season number, but
given the much larger downgrades in industrials, it is clear that resources will
remain the earnings leader in Australia. Given China remains one of the few
major economies with the scope to stimulate growth using monetary policy, we
would expect resources stocks would also be earnings leaders in other
developed markets such as North America and Europe.


Highlights
 Asustek (2357 TT) beat Andrew Chang’s Street high profit estimate and the
stock remains a conviction buy in the Asia MarQuee.
 Nicholas Cunningham remains bullish on JR East (9020 JP) despite the
expected entry of three new low cost carriers in Japan in 2012.