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“Over the past year, the next-move-is-up scenarios were more likely than the next-move-is-down scenarios. Today, the probabilities appear to be more evenly balanced.”
Dr Phillip Lowe, Governor, RBA
As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.
Materials
“Underlying demand remains strong and the business is delivering good returns...However, first-half earnings have been impacted by volume lags and delays to major projects and infrastructure, extreme rainfalls on the east coast in October and a less favourable product and geographic mix shift.”
Boral Trading Update
Global Economy
“The EU economy is facing an exceptional amount of uncertainties, which could weigh as well on investment and consumption more severely than currently expected.”
Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, Taxation and Customs
Economy
“The current economic environment is a challenging one, with an imminent federal election, a declining real estate market and tighter lending practices."
Tony Weber, CEO, Federal Chamber of Automotive Industries
“Over the past year, the next-move-is-up scenarios were more likely than the next-move-is-down scenarios. Today, the probabilities appear to be more evenly balanced.”
Dr Phillip Lowe, Governor, RBA
Energy
“We assess restrictions on coal imports are likely to continue at least to the second quarter of this year...Domestic supply is sufficient, so we suspect imports will continue to drop.”
Philippa Jones, MD, China Policy [Beijing based consultancy]
"As the market is aware, increased input costs for coal, supply constraints in the gas market, weather impacts and ongoing energy policy uncertainty continue to place upward pressure on electricity prices."
Brett Redman, CEO, AGL
Finance
"I don't believe that non-banks have the capacity to completely fund the void [in mortgage financing], purely because the banks have such a huge dominance and it is a large proportion of loans."
Mario Rahayem, PCEO, Pepper Group
Property
“Despite the challenging residential market, we believe our high-quality residential product, located close to amenity and transport, will continue to outperform the wider market.”
Mirvac ASX Announcement
“Our Office Demand Index saw the Finance, IT and Property Services industries record over 200 enquiries last year, and we expect this will continue to grow in the year ahead.''
Simon Hunt, MD Office Leasing, Colliers International
''Both markets have strong economic fundamentals, but the Melbourne CBD has seen both strong supply of new office space and strong demand for that space. In the Sydney CBD the combination of a net withdrawal of office space and a tight market has left demand nowhere to grow into.''
Ken Morrison, CEO, Property Council of Australia
Insurance
"The potential changes to ongoing and grandfathered commissions on life insurance could be a game changer for the industry, depending upon how hard ASIC goes when it reviews these structures."
Anthony Brown, CEO, NobleOak Life Insurance
Retail
"The fashion watch category continues to see declines globally, and we are being impacted by this secular trend. We now expect declines in watches to continue in the fourth quarter and into next year at a greater rate than we had anticipated.”
John Idol, CEO, Capri Holdings (Owner of Michael Kors, Versace, Jimmy Choo)
"We are not seeing a slowdown...we continue to be excited about the opportunity for us. We're highly underdeveloped in China."
Patrice Louvet, CEO, Ralph Lauren
“By following our store rollout strategy, our team has delivered growth in top line sales and a corresponding record profit in a difficult retail environment."
Anthony Scali, CEO, Nick Scali
Markets
“Happily, some of the volatility that we saw in the fourth quarter, particularly in December, has continued.”
Douglas Cifu, CEO, Virtu Financial [US Volatility trader commenting on a bumper 4Q profit]
Infrastructure
“Outsourcing opportunities are emerging across the government and hospitality sectors and there is a strong pipeline of work in the justice, critical infrastructure and defence estate development sectors — all of which are growth markets for us.”
Grant Fenn, CEO, Downer Group
Important information: This material has been prepared by NAOS Asset Management Limited (ABN 23 107 624 126, AFSL 273529) (NAOS) for general information purposes only and must not be construed as investment advice. Certain economic, market or company information contained in this material may have been obtained from published sources prepared by third parties. Nothing contained herein should be construed as granting by implication or otherwise, any license or right to use such third party content without the written permission of the owner.
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