Aussie Profits OK

  The & #160;Australian profit reporting season seems to be & #160;off to a very good start with better than expected results from a range of companies including Alumina, ResMed, JB Hi-Fi, Commonwealth Bank, Computershare and BHP.This week we get another flood of results.The AMP's chief economist, Dr Shane Oliver says that of the 30 major companies to have reported so far, 50% have come in better than expected compared to a norm over the last 6 years of 46.5% (see the chart below).There have been no major blow-ups or surprises. The evolving system of guidance updates before and after the June 30 balance date seems to be working.This week we will get a flood of losses from the property sector to match or exceed those from Stockland and its & #36;18 billion loss announced last week. & #160;Dr Oliver says that & #160;55% of companies have seen their share price outperform the market on the day their result was released. & quot;So while 2008-09 likely saw the biggest fall in profits since 1990-91 this is shaping up as one of the best reporting seasons in several years in terms of companies beating estimates. & quot;Cost savings have played a major role in profit surprises but revenues have also come in better than expected. & quot;Share markets had a volatile week, but continued to rise. Australian shares surged to their highest level since last October helped by good profit results.Dr Oliver says that after lagging global shares during the rebound from the March lows, Australian shares now seem to be staging a dramatic catch-up.Commodity prices and the Australian dollar also continued to move higher on optimism about the global growth outlook.Bond yields fell as US bond auctions went well.Dr Oliver says that having risen sharply over the past five weeks shares are at risk of a pause or correction, particularly as we traverse the normally rough August to October period. & quot;However, any share market corrections are likely to be limited and should be seen as buying opportunities, as the broader trend in share markets is likely to remain up. & quot;There is still a pile of cash sitting on the sidelines which is likely to come into the market as confidence in the economic and profit outlook continues to improve and as investors seek higher returns than those available from low yielding cash and government bonds. & quot;Shares have likely entered a cyclical bull market that has much further to go. & quot;We remain of the view that a move up to 5000 for the Australian All Ords and ASX 200 indices is likely by year end. & quot;  

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