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The Point
Quick, actionable insights for investors
Sep 4
Five major ASX reporting season themes | Aussie spending and rate cuts | The countries benefitting from a weaker US dollar
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Aussies are spending again. But what does it mean for rate cuts?
AUSSIE consumers are spending again – that’s the main message from the June-quarter GDP data out this week.
Overall, growth was slightly higher than expected at 0.6% versus a 0.5% forecast. Annually we are 1.8% stronger than a year ago.
But increased consumer spending comes through as a clear trend, notes Pendal’s head of government bonds Tim Hext.
Despite last year’s tax cuts and February’s rate cuts, for a while it seemed consumers were more interested in saving than spending.
However, household spending rose 0.9% in the last quarter, led by a 1.4% rise in discretionary spending.
Now rate-cut expectations have dropped from 100% chance of one cut by November to 90%.
“It does all feed into the idea that the RBA has time and optionality on its side,” says Tim.
“If the consumer gets more confident from here, some may ask if any more rate cuts are needed.”
How to identify emerging markets benefitting from a weaker US dollar
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How to identify emerging markets benefitting from a weaker US dollar
A weaker US dollar is creating support for emerging-market equities – but not all countries will benefit equally.
The US Dollar Index – which measures the USD against other major currencies – is down about 10 per cent this year.
EM returns have historically been strongest when the US dollar is weak, because servicing US-dollar debt becomes cheaper; domestic purchasing power in EMs improves; and cheaper imports help keep inflation under control, creating room for rate cuts.
Still, while EM performance lifts as the US dollar weakens, the effect is uneven and investors should be discriminating in country selection, cautions Pendal’s EM team.
Economies with a current account deficit – common in Latin America and South-East Asia – benefit most from cheaper borrowing, lower imported inflation and stronger consumer demand.
But big exporters that run a surplus such as Taiwan and Korea can face headwinds as their products become more expensive in US-dollar terms.
Crispin Murray: What’s driving the ASX this week?
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Crispin Murray: What’s driving the ASX this week?
Pendal identified five major themes this ASX reporting season.
1. Overall earnings were okay, with similar trends to February in terms of misses and beats. A third of companies beat by 5% or more and 22% missed.
2. Stock volatililty reached new highs on result days, driven by the tone of messaging and revisions. Almost a third of companies experienced stock moves more than three standard deviations away from their average on reporting day.
3. Rating changes were the most material driver of returns. The biggest re-ratings were generally stocks beginning to stabilise or those that affirmed their status as safe havens.
4. Disappointing large caps were hit harder than smalls. The average two-day relative return for industrial large caps that missed consensus EPS by more than 5% was -7.2% for the ASX 100, versus -3.8% for small caps.
5. Domestic stocks generally performed better than internationally-exposed companies.
Amy Xie Patrick: What the Fed’s shift from inflation to employment means for investors
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Amy Xie Patrick: What the Fed’s shift from inflation to employment means for investors
A shift in focus from inflation to employment hints at a likely rate cut in September observes Pendal’s head of income strategies AMY XIE PATRICK
In her latest article, Amy explains how she is positioning Pendal’s income funds in response to these and other global factors.
Pendal profile: Meet Australian equities analyst and portfolio manager Elise McKay
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Pendal profile: Meet Australian equities analyst and portfolio manager Elise McKay
AUSTRALIAN equities have the potential to offer investors a compelling trio of benefits, argues analyst and portfolio manager Elise McKay.
In this video, Elise explains how the Pendal investment process helps her team identify and take advantage of opportunities in Australian shares.
Latest updates from our fund managers
Income and Fixed Interest
Aussies are spending again. But what does it mean for rate cuts?
September 3, 2025
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Emerging Markets
Emerging markets: Look past commodity exports to countries with strong domestic demand
July 26, 2023
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These podcasts are for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. They have been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on the information, consider its appropriateness having regard to their or their clients’ individual objectives, financial situation and needs. The information is not to be regarded as a securities recommendation.
The information in these podcasts may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information in this presentation is complete and correct, to the maximum extent permitted by law neither Pendal nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information.
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Emerging markets: where else to look in Asia while China remains weak
Subdued US imports are weighing heavily on Asian economies such as China.
Emerging markets investors should look instead to countries driven by strong domestic demand, argues Pendal portfolio manager James Syme.
James points to the World Bank’s latest economic outlook for east Asia, which highlights weakness in China’s economy and an ongoing slowdown in Asian exports.
The bank forecasts GDP growth decelerating to 4.5 per cent in the region – historically weak growth excluding short-term shocks.
“We do see continued weak growth in China,” says James, pointing to tighter monetary and fiscal policy, intervention in the private sector, the effects of the pandemic and a sagging share of US imports.
Instead, James points to Asian economies such as Indonesia and India, which are driven more by robust domestic demand than exports
“Indonesia and India are our only overweight country positions in east and south Asia,” says James.
Weekly fixed interest wrap: close call on next rates decisions; govt bonds at 5pc
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Weekly fixed interest wrap: close call on next rates decisions; govt bonds at 5pc
Two years ago people would have laughed if you said you could buy an Australian Government bond at 5 per cent, says Pendal’s head of bond strategies Tim Hext.
“Full disclosure, I would have joined in.”
On Tuesday, though, the government’s debt manager, the AOFM, issued a new 2054 maturity bond at 4.93%.
“Given subsequent moves in US bonds, that yield is now around 5%,” says Tim.
Meanwhile a Northern Territory 2042 bond is yielding around 6% and a new CBA 10-year bond is 6.45%.
“As low-risk, fixed-interest returns get higher and higher, the hurdle rate for risk assets should also rise,” says Tim.
“If you back the RBA to keep inflation at 2.5% over the next decade, investors should see their money grow at a faster rate with low credit risk.
“Fixed interest is well and truly back. “
Sep 21
Has China turned a corner? | The case for stable inflation | Why volatility could continue | An emerging markets hotspot | How value investors can get AI exposure
Emerging Markets: Why Dubai and Abu Dhabi should be more than just a stopover
You’ve probably flown through Dubai – but have you thought about investing there?
“It’s one of our overweights that’s been doing well and which we think is perhaps flying below the radar,” says James Syme, a senior portfolio manager with our Emerging Markets team.
Since Covid, the UAE has staged a powerful comeback, says James.
“We’ve seen a big recovery in overnight visitor numbers. We’ve also seen a full recovery in oil production which took a big hit during Covid.
“But perhaps more importantly, we’ve seen a number of structural changes that are helping support the recovery.”
Among the reforms is the creation of a new visa category for non-nationals that allows residency for up to 10 years.
“That’s really helped support the movement of foreign nationals into the country.”
What’s driving Aussie equities this week
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What’s driving Aussie equities this week
Here are the main factors driving the ASX this week according to Pendal investment analyst ANTHONY MORAN. Reported by portfolio specialist Chris Adams
THE dominant narrative of resilient global economic momentum and higher-for-longer rates continues.
US 10-year government bond yields rose 7bps last week, driven by higher oil prices, a slightly higher-than-expected inflation print and resilient economic and corporate data.
At the margins there was data suggesting China’s economy is turning a corner.
Commodities were strong overall and US dollar took a breather after its strong rally over the quarter-to-date.
The European Central Bank took a dovish turn after increasing rates last week. President Christine Lagarde indicated the tightening cycle was most likely done. The problem for Europe is they are heading into a recession.
The S&P 500 fell 0.12% and the S&P/ASX 300 gained 1.82% last week.
China’s economy is showing signs of recovery. Here’s how our fixed income team is responding
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China’s economy is showing signs of recovery. Here’s how our fixed income team is responding
Recent data suggests China’s economic activity could be starting to stabilise.
Monthly industrial output sped up and retail sales grew faster than expected. Is this a turning point in the economic cycle?
That remains to be seen, cautions Pendal’s head of income strategies Amy Xie Patrick, who has taken a close look at the latest signals.
“It’s been only a few months since hopes for a re-opening led boom in economic activity were dashed,” says Amy.
“We think activity is now stabilising on a cyclical basis, and China’s economy can continue to gradually recover into the end of the year.
“But structural drags on the economy are heavy and deep-rooted.”
Amy has just published an article covering the strength of the recovery, structural issues and implications for global growth and investing.
Sep 14
Population growth is supporting ASX earnings | Floating rate credit as an inflation hedge | Shopping malls a bright spot for A-REITs | Value in small caps
Crispin Murray: Two factors underpinning ASX company earnings
Most people would be aware from last week’s per-capita recession headlines that Australia’s population growth is outstripping economic growth.
But population growth – especially immigration and temporary visas – is also supporting corporate earnings, says Pendal’s head of equities Crispin Murray.
“All up, we’re probably looking at about a 3 per cent rise in the population today versus a year ago.
“People are coming to Australia with money in their pockets, setting themselves up and getting accommodation – which is driving up rents.
“Part of the reason we’re seeing resilience in the top line of companies is because they’re basically driven by nominal GDP, not per capita GDP.”
Population growth is also offsetting the effects of the ‘mortgage cliff’ which forces households into higher, variable mortgage payments as low-rate fixed loans expire, Crispin says.
“With each company we met over reporting season, we talked about the issues facing them and if they were seeing consequences from this mortgage cliff. So far, the consequences are very limited.”
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