Morgan Stanley: Neutral on Australian Equities

Writing in Morgan Stanley's Global Strategy Bulletin, Gerard Minack, Toby Walker and Antony Conte are neutral on Australian equities:

We are neutral Australian equities and think risks are to the downside. We think earnings growth will remain positive, but a U.S. recession could worsen what is already a declining trend. We think 2009 consensus earnings growth of 11.7% is more at risk (particularly the 17.6% forecast for metals & mining). Importantly, domestic multiples remain at stretched levels, and we think a multiple de-rating is required to price in what are now substantial global risks. Finally, correlation to U.S. markets means we would not avoid the ramifications of a U.S. bear market or a fall in investor risk appetite.

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