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by Emmeran Eder, Euro am Sonntag
M.A few thousand spectators applaud Novak Djokovic’s ninth victory at the Australian Open tennis tournament in Melbourne. Such a backdrop would be unthinkable in Europe at the moment. But down under, the pandemic was brought under control with tough measures.
Therefore, there are currently almost no corona cases. If someone gets infected during the tennis tournament, as it did recently, entire cities are immediately locked down for days.
This is one of the reasons why the Australians managed to get the disease under control. In addition, efficient contact tracking systems, a well-functioning Corona app and restrictive border controls helped. Anyone who wants to enter the country has to go into a two-week quarantine in a hotel at their own expense.
Although the vaccination campaign is not due to start until the end of February, daily life is largely normal. Retail and gastronomy are open, as well as cultural and sporting events take place in front of an audience – in compliance with a strict hygiene concept. Nevertheless, there were two longer, almost nationwide shutdowns in Australia in the previous year, from which the economy suffered severely. A decline in GDP of 2.5 percent is therefore expected for 2020, which is little in an international comparison.
This year looks a lot better, however. The Australian National Bank expects GDP to grow by four percent. There are several reasons for this. One of them is that the central bank cut the key rate to a historic low of 0.1 percent.
That heats up the real estate market. Although this is already at a record level, the Commonwealth Bank expects a further price increase of 16 percent in the next two years. The financial institution’s analysts see the significant increase in demand for mortgage loans and a sales rate of 90 percent in house auctions as indicators. “The boom is fueled by record low interest rates and a strong recovery in the labor market,” said Gareth Aird, real estate analyst at Commonwealth Bank.
Because the number of unemployed, which had risen sharply in the previous year, is expected to decrease to 6.4 percent by the end of the year. Last year was a shock for the Aussies. In the state that slipped back into recession in the pandemic for the first time in almost 30 years, there were queues hundreds of meters long in front of employment offices in 2020 – as was the case last in the time of the Great Depression.
The confidence of the fundamentally optimistic residents of the fifth continent is all the greater. Consumption should also benefit from this. Economists expect a V-shaped recovery.
Strong demand for raw materials
The sharp rise in raw material prices also contributes to this. Many raw materials such as iron ore, coal, gas, gold, copper, uranium and nickel lie dormant in the soil down under. The first three are among the country’s most important export goods. The rapid upswing in Asia and, above all, China has significantly stimulated demand for it, and raw material prices have risen to multi-year highs.
Some insiders are already talking about a new commodity super cycle that would bring Australia high revenues for years. Nickel could become a major export product as it is needed for electric batteries and hydrogen technologies.
Despite the rosy outlook, Australia also has a few problem areas. Tourism, which contributes at least three percent to GDP, suffers from the corona restrictions. The slump in the education sector, the fourth most important branch of the economy, is even worse for the economy of the state. Foreign students, mostly from Asia, are currently unable to attend Australian universities because of the pandemic.
In addition, the relationship with China, the most important trading partner, is heavily strained because of the repression of the democracy movement in Hong Kong. On the other hand, China’s government is cold because Australia has demanded a complete clarification of the outbreak of the pandemic in Wuhan.
The government’s critical stance in Canberra has prompted Beijing to introduce import restrictions on coal, copper and agricultural products. “But that is not as devastating as it seems at first glance. The world market is sufficiently receptive to down-unders exports. In addition, the trade-political conflicts should not remain permanent,” said Gerhard Heinrich, an analyst at the information service Emerging Markets Trader.
Not overpriced yet
Therefore, the Sydney stock exchange clearly offers investors more opportunities than risks. The most recently bullish leading index S & P / ASX 200 has risen 22 percent since the beginning of November, but is still four percent away from the top from February 2020. With a P / E of 20 for 2021, it is no longer cheap, but it is also not overpriced.
With around 200 values, the stock market barometer is widely spread across several industries and offers a dividend yield of 3.5 percent. The main sectors are finance, raw materials, consumer goods, health and real estate. In addition to price gains, investors also have the opportunity to benefit from the recently strengthening upward trend of the Australian dollar against the euro.
The ETF tracks the most important Australian share index S & P / ASX 200. Five banks, the commodity groups BHP and Rio Tinto as well as the health care group CSL and the retailer Woolworth dominate the barometer with a weight of over 40 percent. Since there is no currency hedging, there are also opportunities for currency gains. The net dividends are distributed.
The Australian dollar shows an intact upward trend against the euro. Because the economy is recovering faster than Europe, this trend should continue. Investors with leverage 3.5 can benefit from this with the Turbo Certificate from Morgan Stanley. The knockout barrier is currently 29 percent away.
More news about Commonwealth Bank Australia Ltd.
Image sources: Jan Kratochvila / Shutterstock.com, Adrian Matthiassen / Shutterstock.com