Question

What is the current state of the Australian Stock Market? Your aim is to convince and make an investment recommendation to investors for Australia Securities Exchange stock (BUY, SELL, HOLD, etc.). Discuss appropriate financial information (data and ratios).

Answer 1

Current scnerio of the whole world is not going good and ASX is not an exception. And, the reasons attributed to it are COVID-19, Trade tension between US and China, deteriorating political ties of US, India, Australia, Taiwan, Germany and UK with China and the Slow down in the global supply chain, thus impacting the overall market situation.

The Australian Stock Market index ASX 200 can be explained from the figure given below:

Although the market came down heavily due to the global cues caused by COVID-19 and the world wide halting of movement of people and goods and sevices, The ASX has recovered more than 30 % from the level of 4500 in Mar2020. And , now a consolidation phase is going on with its range bound movement with a likable surge expected in near terms.

Few Investment recommendation on ASX are as below on four major factors such stock's PE ratio in comparison to PE of the industry/sector, dividend payout ratio, Interest coverage ratio and FIIs interference:

1. A2 Milk Company: Although the company is not paying dividend, the market cap and growth is good. And moreover, it is available at very good price. BUY

2. Worley Limited: This is into the energy sector and all the above financial parameters mentioned above is very good and in line with a growth trajectory. So, my recommendation is HOLD / BUY.

3. Australia and New-Zealand Banking: The main point of this stock is the PE ratio which is 10.7 whereas its competitors are having more than 15. So there is a lot of surge expected in near times. BUY

4. James Hardie Industries: The stock from the materials' industry is good but the currently it is over-priced and trading at an all time high. So the possibility of this stock to come down is more. And morever, the PE ratio is very high eventhough the market cap is second largest.  So, one can very well expect a better price to enter into it. My recommendation is SELL.

Hope it clarifies the query.