Mark LaMonica: Welcome to another edition of Market Minute. This week we have Matt here to take us through everything happening in markets. The firm’s IPO big news the IPO that now is not happening. So maybe just start off with an overview of what happened.

Matt Wilkinson: Yeah it’s an interesting one Mark. The second largest IPO in corporate history has been canceled. And ultimately I think the market is saw valuations of that IPO stretched too far and there wasn’t enough participation. And if the money wasn’t there then the IPO wasn’t going to go ahead. So the the local market was certainly skeptical. And if you believe what’s written in the press, there was a lot of institutional managers that that weren’t willing to incorporate it into their portfolios and get it away.

So yeah, it’s a tough one for the management of firmus, but I guess they go back to the drawing board and go somewhere else. As has been reported, they might go to the US, but yeah, I guess that’s still to play out.

Mark: Now we talk a lot on this about valuation. And obviously that’s a big focus of you and the team and how certainly some parts of the market valuation is stretched. And you’re of course looking for those opportunities. Does this signal anything about the wider market appetite for some of these AI related companies that are trading at very high valuations?

Matt: I think it points to investors scrutinizing cash flows. And when valuations, particularly on an early stage company like firmus is, are really stretched the way they were for the IPO. I think it just points to investors applying the right amount of scrutiny before putting their money where you know where their mouth is, so to speak. So which is a good thing because it means that markets are still being sensible overall.

And they’re not just chasing anything that’s, you know, has an AI, I guess, relationship or an AI moniker attached to it. So that’s a good thing for investors overall because the market’s not getting carried away with itself. And and it’s playing by putting the ruler over over companies that, you know may be stretched too far into the valuations.

Mark: All right. Let’s talk a little bit about the economy in Australia. So we’ve talked a lot about certainly rate rises. We’ve talked a lot about inflation. How’s the overall economy doing. Because obviously the intention is to slow economic growth to hopefully slow inflation. Are we seeing signs of that.

Matt: Yeah I think the RBA is moving certainly in a rate rising cycle, a tightening cycle that’s going to put consumers on the back foot. Clearly mortgage holders on the back foot. We’ve seen rate rises come through over the last. Last month they went well. Last week I think it was they went higher again. The data’s certainly showing signs of a bit of a slowdown.

And economic growth is, you know, kind of anemic I guess is a word to that could be used. But inflation is the number that the RBA looking at. So they really want to see that come down. But I think the signs from the consumer and the consumer survey is surveys are certainly showing that they’re pulling you know tightening I guess the the belts for one of a bit of term.

And I think that’s going to sort of pervade through. And obviously what we’re seeing with property prices, the wealth effect is, is having an influence on on the consumer spending as well. So you’re definitely seeing those signs of the economies that are pulling back in the in the face of rising rates.

Mark: Then how does this compare to global economic growth. So we’re also seeing rates going up in other places like the US. How are those economies performing?

Matt: Yeah, the US economy is certainly different picture to Australia. Growth is very strong there. The AI and data center spend CapEx spend is filtering down through the economy and broadening out. That’s great for for the US market, but interest rates and the fed are in a tightening cycle as well. Now we think the market is pricing and other fed rate rise come December.

I believe it is. So policy is restricting further. But in the face of the amount of CapEx spend by the hyperscalers, there’s the economy is still going quite strongly there. Unemployment’s in good shape, reasonable shape as well, is nothing to be overly concerned about. But that’s before we turn our attention maybe to energy markets, which is a bit of a concern globally.

Mark: And then are there any particular areas you think there are opportunities for investors, either on a country level and an asset class level, potentially sectors within the share market? Where where are you guys? Seeing opportunities?

Matt: Sure. I think there’s pockets of opportunities that we’re seeing around the US is currently on. The growth metrics that we’re seeing is a very attractive place, is attractive place to to remain invested and don’t want to be too. Certainly underweight that area from a diversified portfolio approach. And what we’re seeing is those hyperscalers actually having reasonable valuations, given the growth rates that they’re showing right now in Australia, some of our growth investment style managers actually appear to be well positioned in the local market.

Many of them have underperformed the broader market over the last six and 12 months, and we think there’s some opportunities there to invest. You know, across our diversified portfolio.