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Atlantic Pacific Securities Market View: Investors thirsty for yield

Announcement posted by de2 Communications 14 Mar 2016


14 March 2016: SYDNEY --The Aussie market has been buoyed by the thirst for yield with banks and telecommunications company Telstra leading the way.

“Locally the market has been buoyed by what appears to be a thirst for yield, with the big four banks and Telstra leading the way,” said Gary Huxtable, client adviser at Atlantic Pacific Securities.

“Utilities and Gold miners are currently under-performing, indicating an increased risk appetite,”

According to Huxtable, “Gold miners have been affected two fold, with both the value of the precious metal recent descent, and AUD strength affecting margins,”

However, Huxtable notes that there is supportive data for both the bull and bears regarding two of the main themes contributing to global market performance at the moment.

‘This has created an environment of equilibrium post the initial open for the local market today,” said Huxtable.

“Many commentators have been calling a bottom on oil, with US oil production having begun to decline year on year, and managed money beginning to increase long positions,” he said. 

Huxtable notes that since January, the spread between spot Brent prices and 2020 Brent prices has dropped per barrel, indicating selling in 2017, 2018, and 2019 futures contracts. 

“The bears are seeing this as a sign that explorers and producers are lacking confidence regarding the continuation of this current rally. At the moment it is a tug of war between the big money and the smart money, and big money is winning,”

“Whilst many market participants are viewing Friday’s equity rally as a delayed positive reaction to Mario Draghi’s stimulus measures there also remains many doubters regarding the effectiveness of negative interest rates,” 

“Looking forward this week all eyes are on the FOMC Thursday morning, with the bulls believing that the US is currently the one shining beacon in the global economy. On the other hand, the bears need further evidence that the QE program has been successful, impacting the implied results for Japan and Europe’s current stimulus efforts,” added Huxtable. 

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