So, this holiday I was asked to do an economic snapshot and investment outlook for 4 countries in the EFA, with a view to tracking each country's main stock index via an ETF. So, here's my work for Australia:
Australian Economy & Equity Investment
|
Name
|
Australia
|
|
Population (2012)
|
22.68
million
|
|
Currency
|
Australian
Dollar (AUD)
|
|
2012 GDP
|
US
$1.57 trillion
|
|
2012 GDP Growth
|
3.4%
|
|
IMF GDP Growth Prediction for 2014
|
2.8% (2.5% predicted for 2013)
|
|
Unemployment
|
5.6% (March
2013)
|
|
Inflation
|
1.6% (March
2012) 1.3% in 2013 Q3 – up from 04.% in Q2
|
|
Budget Deficit/Surplus
|
Negative
$12.3 bn
|
|
Currency Rate
|
AUD/USD
0.95
|
|
IMF CPI Growth Prediction for 2014
|
2.5% (2.2% for 2013)
|
|
Main Sectors of Economy
|
Services
- 68% Mining (including “mining
related economy”) 19%
|
|
Main Exports
|
Unprocessed
resources
Agricultural
goods
|
|
Main Export Partners
|
China
29.5%
Japan
19.3%
South
Korea 8%
|
|
Main Imports
|
Machinery/Vehicles
Crude
Oil & petroleum products
|
|
Main Import Partners
|
China 18.2%
USA 11.6%
Japan 7.8%
|
|
Main Stock Exchange
|
ASX
|
|
Market Cap
|
(January
2013) A$1.4 trillion
|
|
Market Performance YTD
|
+14.45%
|
Australian
Exports
·
Australia is the world’s biggest producer of:
Bauxite/Aluminium, Opal;
2nd biggest of: Nickel, Gold, Zinc
3rd biggest of: Iron Ore, Diamonds, Natural
Gas – predicted to become the world leader of LNG production by 2020
·
Gold has gained 6% in the last fortnight with signs
that the Fed won’t taper QE anytime soon. Currently $1350/oz. Good for
Australia as it costs most of their mines $1000 approx. to produce 1 oz.
·
Australia exports predominantly unprocessed raw
materials into Asia for manufacture
·
Australia is the third largest consumer of
petroleum in the world and imports over 50% of its crude oil/petroleum and will
produce less than 20% of its needs by 2020. It also gets over 80% of its crude
imports from the Middle East via Singapore, and is the only country in the IEA
that doesn’t stockpile 90 days’ worth of crude oil. With its isolation,
continental size and reliance on transport fuels, Australia is very vulnerable
to crude oil price increases caused by instability in the Middle East.
·
Chinese
Slowdown A slowdown in the Chinese economy would have a huge effect on the
Australian economy, especially for the mining and commodity sectors. The IMF
diagram below shows that a slowdown in Chinese demand could cause Australian
GDP to decrease by over 3%. This makes the ASX particularly vulnerable as many
of the biggest companies in it are commodity/mining companies.
·
Another issue for Australia is the threat of a
gold & commodity price drop without a fall in the value of the AUD. If gold
were to trade down below $1000 oz for a sustained period as long as inflation
increases and the value of AUD falls, the real cost price of production of all
commodities falls & cushions the mining sector. The Reserve Bank of
Australia has created a strong AUD recently with high interest rates, so a drop
in commodity prices could severely affect the economy.
·
The 5 biggest companies on the ASX are: BHP Billiton (BHP) – largest mining
company in the world as of 2011; Commonwealth
Bank (CBA) – Banking; Rio Tinto
(RIO) – metals & mining; Westpac
(WBC) – Banking; Australia
and New Zealand Banking Group (ANZ) – Banking. The top 10 shows a very similar pattern of
commodity and banking companies.
·
The ASX experienced drop in 2008 along with other countries, but had
experienced less of bubble growth, so didn’t fall anywhere near as much as the
FTSE. The ASX generally has had a less pronounced boom & bust cycle.
ETFs
The
Vanguard Australian Shares Index ETF
is a physical ETF & attempts to track the ASX. Their 10 biggest holdings
are in the companies above, plus a few others such as Westfarmers, and make up
over half of the company’s holdings. High exposure to the services sector in
particular
Although
not very diverse, tracking the ASX is a relatively safe & defensive option;
the Australian economy has historically experienced higher GDP growth than the
world average and has been less volatile
than other developed countries’ – it’s commodity exports have enjoyed generally
increasing demand from developing countries so reduce the impacts of crashes in
its large financial sector. E.g. In a bad time for the financial sector, the
gold mining sector experiences high demand & vice versa.
My Outlook
In regards to Australia, I would be bullish towards an ETF
tracking the ASX. As today it has been confirmed that Syria has destroyed its
chemical weapons facilities, it seems the prospect of turbulence in the Middle
East & a following Australian oil shortage is receding. There’s been some
decline in gold and metal prices prompted by signs of general recovery and a
more positive than expected tone of the Fed’s announcement today, a possible
Chinese slowdown could also see demand for Australia’s fuel resources lessen.
Falling commodity prices will also pull down the AUD, which, in moderation,
should counteract a slowdown by increasing competitiveness of Australian
exports. As other European countries
come out of recession and the US debt ceiling situation is averted, demand for
Chinese goods and thus Australian resources will increase too. Finally, strong
growth of the ASX so far could be signal the start of a more bullish period for
stocks which bodes well for ETFs tracking the ASX.
page and buy however many books you need to make up your sales gap from any of the books that've been selling well for a while (at least 10 days). When they arrive, relist them straight away on Amazon, undercutting the lowest price by about 10p. Obviously the more popular the book, the quicker it'll resell. I tested this out for you guys and bought 5 copies of 
, all of them sold within 4 hours of me relisting them. An easy way to work out the rough loss per book is to just take the postage cost as your loss value. Like I said, see this as paying for your masive Christmas profits. Anyway, hope this helps anyone who thinks they'll miss their sales minimum.
