Crispin Murray: Mispricing is opening up opportunities on the ASX

Investors should look through the concerns occupying markets right now as pockets of opportunity are emerging. Pendal’s head of equities CRISPIN MURRAY explains where to look

• Volatility is creating opportunity
• Risks are rising unevenly
• Find out about Pendal Focus Australian Share fund

INVESTORS should keep focus on the opportunities opening up across the ASX as global disruption leads to short-term market selldowns, says Pendal’s head of equities Crispin Murray.

Markets tend to take a very short-sighted view of global risk events, extrapolating near-term news flow without considering how businesses adapt to new circumstances, says Murray.

That means events like conflict in the Middle East, energy supply chain disruptions and the ongoing roll out of artificial intelligence tools can lead to mispricing, creating opportunities for investors willing to look through the short-term noise.

“Markets are short term – they don’t think about how things may change,” says Murray.

“Whenever you have confusion, uncertainty, you tend to get liquidation in markets, which creates significant mispricing and therefore opportunity.”

Murray was speaking at Pendal’s bi-annual Beyond the Numbers webinar.

Energy shock

Murray says the most immediate issue facing global markets is disruption to energy supply from the conflict in the Middle East.

He estimates that between six and eight million barrels of oil a day are not reaching the market, while refinery outages are creating even more pressure in refined products.

Investors need to remember that energy disruptions have a broader impact beyond big fuel users like airlines.

“This is about a lot of companies that have freight as a key input cost or use other oil related products like plastic,” he says.

“So there will be potential earnings impacts the longer this persists.”

A wide range of commodities are dependent on Gulf suppliers, including key fertiliser inputs. Fertiliser supply constraints could impact crop yields and ultimately lift food prices, says Murray.

“That takes longer, but it is a material effect on inflation,” he says.

Supply disruptions to LNG – where Qatar represents around 20 per cent of world seaborne supply – could also be a threat to global markets.

“LNG has a very material effect in terms of power supply for Europe and also for countries like Korea, Japan and Taiwan,” says Murray.

“There may be rationing of power, and that can affect a broad range of industries, including, for example, semiconductors.”

Even if the conflict resolves quickly, supply disruptions will continue to manifest through the year, meaning investors should expect a higher oil price for the remainder of 2026.

AI repricing

Murray says the other big theme driving equity markets is AI, particularly the effect of AI-assisted coding on how investors assess software businesses.

Recent AI product launches have raised legitimate questions about the durability of some software and platform business models, contributing to a sharp derating in those stocks globally and in Australia.

“The launch of Claude Cowork made the user interface of developing software a lot easier, and the various plug-ins related to things like law and finance,” says Murray.

“The market very quickly saw this as a watershed moment in terms of eating into the competitive moats of a lot of industries.”

But he says assuming the sector is in structural decline it would be a mistake.

“We move from a world where, effectively, humans act as a constraint on the work that can be done… to a world where agents work with agents.

“That creates an exponential development curve that allows things to be done far quicker and far cheaper than before.

“But these franchises are more complicated than just simple software code.”

Established companies retain advantages in customer workflows, access to data and distribution moats that could protect future earnings, he says.

That means the market’s indiscriminate sell-off of software stocks is probably more than the underlying fundamentals justify.

“There is no doubt that uncertainty means that the level of valuation that these stocks have previously traded at is unlikely to be recovered,” he says.

“But we also believe that currently, what we’re seeing is sort of a liquidation of a lot of these positions, and it’s creating potentially some opportunities.”

Contained credit risk

Murray said the third major theme in markets right now is a growing concern about private credit, especially where heavily leveraged businesses are exposed to the same AI-related pressures affecting parts of the software sector.

He said some losses are likely to emerge and liquidity may tighten in parts of the market. Even so, he does not believe the problem is broad enough to destabilise the wider economy.

“We do think we will see fallout,” he says.

“But we don’t believe that the size of it is such that it will create systemic issues.”

Finding value

Murray says for all the concerns, investors should remember that the global economy, particularly the US, was in good shape before the latest Middle East shock.

“We were seeing growth picking up, inflation under control, interest rates gradually falling, earnings growth strong – and that is good for equities.

“The final conclusion is that there is substantial mispricing in this market. There is a lot of opportunity.

“For the patient investor, the investor who takes the medium to long term outlook, there’s going to be some really great opportunities to make money here.”

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About Crispin Murray and the Pendal Focus Australian Share Fund

Crispin Murray is Pendal’s Head of Equities. He has more than 27 years of investment experience and leads one of the largest equities teams in Australia. Crispin’s Pendal Focus Australian Share Fund has beaten the benchmark in 12 years of its 16-year history (after fees), across a range of market conditions.

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management. 

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