I appeared on Channel News Asia again this morning at 8:20am AEST / 6:20am SGT. My questions and my responses in the form of brief notes are below:
Q1. What can we expect from the Australian market today?
After a positive finish to U.S. equities last week, I expect a positive start to the ASX this week, although it may be a little subdued due to the looming RBA meeting on Tuesday. The ASX200 did well to finish last week to move back above the key 5800 level which will likely kick in and provide some support now.
Q2. All eyes will be on the Reserve Bank of Australia’s policy meeting on Tuesday. Will the central bank cut interest rate?
A couple of weeks ago, I was erring on the side of saying, “no”, however I now expect them to cut again to a record low 2%. Inflation data a couple of weeks ago wasn’t great and the RBA have been very open about the level of the Australian dollar (AUD/USD) and how they don’t want it to remain at its current levels. The fact that it nearly touched 0.81 last week wouldn’t have pleased the RBA and it will likely be a key factor in their decision tomorrow.
Q3. The Australian government has toughened penalties to stop foreign investors from illegally buying homes in the country’s overheating property market. Will this cool the sector?
In the short term, it may actually heat it up even further, as investors attempt to purchase before any law is passed. This new focus will be welcome news to the public as the issue of illegal foreign investment has been well covered in the media, yet nothing seemed to be attending to it. In the long run, it will obviously diminish demand a little.
Q4. Major domestic banks will report their earnings this week. What’s your expectations?
As always, the Big 4 Australian banks always make lots of money. They are well established, stable, large and very profitable. I don’t expect there to be any change to that long standing situation.