Newspaper icon
The latest issue of Financial Standard now available as an e-newspaper
READ NOW

Investment

Depreciating Aussie dollar could prove opportunistic

Despite a turbulent reporting season ahead due to the depreciating Australian currency, Maple-Brown Abbott co-portfolio manager Matt Griffin has highlighted some of the sectors that stand to benefit.

Over the last quarter the Australian dollar is down 9%, around $0.06, to the US dollar, which Griffin said is not reflected in consensus numbers for most stocks.

"Sell-side estimates always become a bit stale at the start of the year, as analysts haven't updated their number for several weeks during the holiday season. As a result, consensus is still using $0.67- $0.68 to US$1.00 in a lot of their assumptions," Griffin said.

He believes companies with offshore operations, such as US tech companies, can capitalise from the stronger US dollar, with the weakened Australian dollar to also boost M&A activities.

"For a US private equity firm or corporate acquirer, the valuation of companies in Australia is now 10% cheaper than it was last quarter, so we expect more M&A activity this year," he said,

"A great example of this is the bidding war over Insignia Financial."

Griffin is also bullish on the smaller end of the financial sector, especially those tied to the US market.

"Any easing of inflation and interest rate cuts should bolster consumer demand for credit, and lower funding costs," Griffin said.

Additionally, Griffin said the Australian gold price is now valued relatively high and could produce plenty of margins for domestic miners.

"We are expecting hits and misses by sectors this reporting season, but ultimately it will come down to those stock specific stories and how companies are mitigating potential headwinds heading into 2025," he said.

Read more: Matt GriffinMaple-Brown AbbottM&ACurrencyInsignia FinancialFX