0528 GMT [Dow Jones] Credit Suisse lifts its S&P/ASX 200 year-end target to 6,000 from 5,600 as “de-equitisation” comes to Australia. “Investors will not have to buy any new Aussie equity this year,” says CS strategists Hasan Tevfik and Damien Boey.
“M&A has picked up, debt is the preferred form of finance and 21st Century Fox has de-listed. Limited, if any, net equity supply and continued solid demand promise to be positive for index levels.” The strategists add that the lowest cost of debt in a generation and recovering cash flows should encourage companies to further retire equity via M&A and buybacks.“Companies that may benefit from the low cost of debt include M&A targets such as Myer (MYR.AU) and Beach Energy (BPT.AU), value enhancing acquirers such as carsales.com.au (CRZ.AU) and TPG Telecom (TPG.AU); and EPS accretive buy-backers such as CSL (CSL.AU). Index last down 0.6% at 5401.4. (firstname.lastname@example.org; Twitter: @DavidRogersWSJ)
- greater reliance on cheaper debt instead of equity
- continuing switching from cash to equity by investors chasing superior returns
- possible increased M&A activity in the 2H 2014 with possible targets such as Myer and Beach Energy. In addition other companies (CRZ, TPG) may seek to grow via acquisitions
- improved corporate cash flows encouraging them to retire equity via buy-backs (e.g. CSL)
Their comments motivated me to look again at a chart of the XJO. Of late I have taken a renewed interest in Daryl Guppy”s Multiple Moving Averages. (MMA).These charts can be quite informative with observations to be made such as:
- a clear entry signal for medium to long-term investment in full cross overs of both the short and longer-term averages.
- a market evaluation of a reasonable share-price for the stock(s), using these averages.
- the investor can distinguish between short-term “noise” and long-term trend by basing entry and exit on the longer-term averages, such as the 60 period average.
- convergence and divergence of the MMA lines gives a visual clue to the evolution and strength of momentum, Weakening of momentum may be an early signal to exit to a stock with increasing momentum.
- subtle and constant variations in the strength of the trend can be easily eye-balled, by looking at the direction of the MMA’s
This chart clearly shows an ideal entry time zone of medium to long-term investment in and around August 2012.
In the intervening two years up until the present time there have been four well-defined periods of share-price retracement.
In each case the short-term averages dipped into the longer-term traces but soon rebounded.
This appearance would have encouraged investors to wait out the retracements and to stay with the strong long-term trend of two years duration.
To the present time, the longer-term averages remain fairly well-spaced, and their direction is still upwards. No need to take fright and to pull out of one’s investments,