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Morningstar runs the numbers

Lex Hall  |  22 Jun 2020Text size  Decrease  Increase  |  
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We take a numerical look through this week's Morningstar research. Plus, our most popular articles and videos for the week ended 19 June.

5.1 per cent

The expected fall in US GDP in 2020, according to Morningstar’s head of economics Preston Caldwell. While this is far worse than the GFC, Caldwell is optimistic. “Before jumping to pessimistic conclusions, however, investors should consider a much more important issue: What is the recovery going to look like? We expect robust catch-up growth in the years following 2020. By 2024, we think that the US GDP level will recover to just 1 per cent below our pre-COVID-19 expectation.”

58.4 per cent

The amount by which Chinese investment in Australia fell in 2019, according to a report by KPMG and Sydney University. Chinese investment in Australia declined 58.4 per cent to $3.4 billion in 2019, the lowest since 2007, and down from $8.2 billion in 2018. The number of deals was down 43 per cent from 74 in 2018 to 42 in 2019. The report was compiled before the announcement of the proposed national security test for all offshore bids for sensitive assets, which could further choke investment flows from Chinese companies.

106

That’s the number of stocks under Morningstar coverage that are trading at below their fair value estimate, writes equity analyst Gareth James. “Across our entire Australian and New Zealand coverage list of 190 stocks, 106 stocks still trade below their fair value estimate, and 15 still have our highest five-star rating. The energy sector is a clear standout from a price-to-fair-value perspective.”

$50 billion

The extent of the RBA’s bond-buying as at 2 June, writes Anthony Fensom. This is to ensure bond markets remain “functional and to achieve the yield target”, the RBA says, which is making some very uneasy. BondAdviser’s John Likos suggests the extra liquidity measures by central banks globally will exacerbate yield compression, intensify the search for yield and increase the potential for negative interest rates, including in Australia. Investors are now buying bonds not for their yield potential but for their capital appreciation and their sensitivity to interest rate moves, Likos says.

82 per cent

The amount by which Albemarle, the world’s largest lithium producer, expects to have expanded its production capacity between 2019 and the end of 2021, writes Morningstar analyst Seth Goldstein. “We expect Albemarle to continue investing in increasing its lithium capacity after 2021,” Goldstein says. “In our view, this will likely occur through either the acquisition of spodumene conversion assets, such as the Xinyu acquisition in 2017 or through brownfield capacity expansions in China and Australia.”

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is content editor for Morningstar Australia

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