With Donald Trump recently elected as US President, Australian market is now regaining momentum after losing more than thirty-five billion dollars from the value of shares as a knee-jerk reaction in the week following the election outcome. There has been a speculation around how the markets would be performing in the long-run, and diverse sentiments prevail around economic impacts of Trump’s victory at a global level. The focus of the discussions recently came down to kind of stocks that will have an upper hand over others. With some bit of gearing-up in the market in the past few days, key things to make out of the recent election outcome have been outlined hereinbelow:
Boom in Infrastructure Segment: The recent news about the infrastructure giant, Boral, inking an acquisition deal for the US building and construction group, Headwaters has set an example of how Australian infrastructure sector can leverage many such opportunities emanating from the US. In last one year, Boral stock price has gone up 11.21%. Further, the US president’s plans to make an investment of about $1 trillion in infrastructure gives a headway to Australian stocks that are or will be in direct engagement with the US in said sector. Another key player who has been the talk of the town is Austal who is the contractor for Littoral Combat Ship programs for the US Navy. Construction companies like Downer are also expected to see positive momentum.
Gold sector has been generally going up with some intermittent jitters: Post the election outcome, shares of Australian gold miners (including Newcrest Mining, St. Barbara etc.) witnessed a humungous upward jump with the movement in gold prices. Post the initial rise, the stock prices did witness a downfall with fluctuation in gold prices, while the same again witnessed momentum and have generally been up on November 21, 2016 (for instance, St. Barbara stock surged about 7%).
Iron prices moved up to highest level in last two years: The election result also got the positive movement in iron ore prices while some believe that the rally has reached its peak. The metal and mining sector index for Australia has been up 4.5% in last one month. Stocks including Rio Tinto have benefitted from the rally so far, with Rio up 13.36% in the last one month. Further, US regulatory reforms may ease up the current challenges in mining and energy sector.
The recovering sectors post the initial reactive blow: Financial sector stocks like Macquarie Group and QBE also took a hit owing to the outcome, while the stocks have been recovering now. Banks also seem to be doing well while managing the volatile scenario.
On the other side, changes related to trade liberalisation may create a negative impact for Australia along with unfavourable interest rate scenarios. Since Trump’s election victory, the Australian dollar has already slipped about 6% owing to rising greenback.
With President Elect Trump policies, many sectors might get a chance to standout going forward. At this juncture, what strategies companies will adopt to have a favourable exposure to the US would also count in medium to long term. It will be true to say that the Trump game might bring huge wins for some while others might hang out in the dark till stability is achieved.
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