Over the year ending 30 June 2014 the ASX 200 Accumulation index
rose by 17.43%.
S& P ASX200 Accumulation
Despite its numerous shortcomings, the Price/Earnings (P/E)
ratio is one of the more common valuation metrics. As at 30 June
2014, the P/E for the Australian sharemarket (ASX 200) is around
15.6 times earnings (i.e. the weighted average earnings by market
capitalisation of the market as a whole), while the long term
average is around 15 times earnings. This infers that the
sharemarket is modestly overvalued at the current time but when
taking into forecast 2015FY earnings, we would expect fair value to
be around 5600 for 30 June 2015, implying potential upside of 3.8%
over the next 12 months.
With limited upside expected in the next 12 months, the outlook
for Australian equities is not compelling. Share prices are driven
by expectations about future corporate profitability, risk and long
term growth. It follows that the market can rise if future earnings
expectations increase. If earnings expectations do not increase but
the market rises regardless, this is referred to as a multiple
re-rate (the market multiple, or P/E, rises) and is usually because
overall market risks are perceived to decrease.
Since the depths of 2009, the market rally has been driven by a
combination of improving corporate profits and because the market
multiple has risen (back to over 15 times earnings). At this point
it is clear that any further rise in the market multiple is
probably unjustified. A market multiple above 15 is potentially
sustainable, but only if risks are likely to remain lower than
historical long term averages. In our view, this is definitely not
the case so the only way the market can sustainably rise is if
corporate profits continue to improve.
In the short term profits may well continue to rise given the
underlying momentum in the economy. However, with the market
relatively fully priced, it will be much more sensitive to any bad
news or external shocks that may emerge.
As a result, the risks/reward equation has moved from favourable
to marginally unfavourable and so we would advocate a move from an
overweight allocation back to a slightly underweight allocation to
An actuarial review of the Invensys Australia Superannuation Fund showed it to be in surplus to the tune of $189.2 million. In mid 2003, the Invensys Group proposed to the trustee that the surplus be repatriated to the principal employer in the group.
Lenders in New South Wales breathed a sigh of relief earlier this month when the Supreme Court ruled in Bank of Western Australia Ltd v. Primanzon  NSWSC 862 that two part-time commercial property investors could not claim relief under the Contracts Review Act 1980 (NSW) because the loans advanced to them were entered into in the course of a trade, business or profession carried on by them.
A key aspect of an innovation culture is keeping it active at all levels of management, from teams to board meetings.
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