Australian Equities and its opportunities

Our first speaker is Jinbei Liu, portfolio manager at Tribeca Investment Partners.

Since taking over sole responsibility for managing the Alpha Plus Fund, she has quadrupled assets under management.

She is a passionate, motivated and dedicated investment manager, having built an 18-year career at Tribeca, starting as an equity analyst in 2005 before taking over the Alpha Plus Fund in 2019.

Today, she will be talking to us about Australian equities and its opportunities.

Welcome, Jinbae.

Thank you, Angelina, and thank you very much for having me.

You know, always such a pleasure to be speaking to investors about, you know, what I love the most and passionate about, which is the share market, Australian market investing.

So look at, you know, 2024 has been an interesting year and very much like 2023, but better.

you know, 2023, we're really worried about where interest rate was going.

And, you know, the fear was that inflation was never going to come off was hitting double digit interest rate, we eventually turn all the economies, global economies into recession.

Now, 2024, when I say it's a better year, simply means that, you know, on economic front, we didn't hit recession, nor has many other economies hit recession, if anything, economy actually showing

it's you know resilience in a way it's a little bit annoying for the policy makers that they feel the policy is not working but we certainly is seeing encouraging signs that inflation is on the way down, LBS slower than anticipated.

So economy holding up okay, we've got the policy interest rate is on hold for many months now

And our view is, although there is a small chance for the hike, but our base case is that interest rate will not move this year and the next move is down by next year 2025.

On the policy front, obviously in July, we're hitting the tax reduction for many households.

So that will support our economy.

And at the same time, some of the tourism numbers will continue to support economy combined with the iron ore and the like.

So economic front, things are looking good.

And that has been very, very encouraging.

Now, aside from the economy in terms of the share market itself, we all know share market sometimes from a outside investor, I guess, you know, for investor that not following the market day to day or minute by minute like myself, we often, you often sometimes wonder why share market move differently from the economy.

Shouldn't the consumer slow down and a lot of those corporate, you know, talk of slowing down in the economy, even though not collapse, but slow down.

Shouldn't that affect the share market instead the share market keeps moving higher?

Look the share market always look forwards at 12 months So or even beyond you know between somewhere between 8 to 8 to 18 months is what share market is trying to look forward to And what we can see in 12 month time You know we would have had the clarity on interest rates and

And by then, interest rate will be cut.

And by then, our economy would have pulled through a transition period where an overheated economy needed to slow down and our inflation would have been falling well in control or well in the band of all the central banks expectations.

We would have had perhaps China coming out of its slow recovery.

Things might get just a little bit better there.

So in 12 months, the world looks like to be a much better place than even now it is today.

And today was a recovery from the previous few years as well.

So the share market perspective, if we look forward, things aren't too bad.

That's why you see share market continue to move higher.

Although the Australian market has been left behind a little bit compared to the global

uh, uh, global say the NASDAQ.

Um, that's partly because our, um, you know, our, uh, heavy resource focus and, uh, resource focus sort of, uh, index weights, um, resources have gone through a pretty tough period, uh, because China's recovery is a little bit slow and global economy is cooling somewhat.

Um, it is giving that temporary pause before the next leg up, if you like.

So for the next six months, we're pretty positive.

We've been bullish the share market.

next six months will continue to be pretty bullish the share market.

Now for the time being we will hit a little bit of volatility it's simply because we as we're heading into August the Australian full year reporting season for financial year 2024 we will have a little bit of earning adjustments and as we talked about before economy was pretty tough it is slowing down with particularly the consumer facing companies like the retail

like the services businesses will be a little bit tough but my view is that the expectation is not high but we just need analysts to reduce the expectation for the next 12 months so we can hence we can rebase and then we can grow from a rebase level.

So for August we will have a bit of volatility, earnings will be downgraded somewhat but that is really just to have a healthy pullback for the share market

and particularly for active investors to have the opportunity to buy back in into the market because we believe from here on over the next six months you will see a fantastic buying opportunity and that will be the point where it is the starting point for the next leg of bull market for the Australian market.

as our earnings wash through its weakest period and as the earnings multiple sort of trough and as the interest rate sort of peaks and then heading lower you know in 2025.

So our view is pretty positive for this market might be a little bit choppy for active investors you know we remain very I shouldn't use the word excited we like

markets that's a little bit volatile, particularly around earning season.

You know, we always believe this is when you find your highest quality companies and take advantage of the price, you know, price sort of movements in this market.

We are seeing quite a lot of opportunities at the moment.

So, you know, hanging tight and take advantage of the market opportunity and then we will see this reporting season.

It's great to see you, Jinbae.

Do you have time for two questions?

Of course.

How does long-short strategy take advantage of the market opportunity given this backdrop?

Look, the long-short is actually very interesting.

When you can do long, that means you buy the high-quality companies like a traditional investor.

At the same time, you can short the companies where you believe the share price is too high.

You can take advantage of both sides of the research that we do and combine it.

A couple of things that it gives you that leverage to benefit from a volatile market is that we can jump in at any time, regardless of what the market flavor of the day is.

We can buy growth company in a period where no one wants to buy growth company.

because we can short other companies of similar characteristics.

So that's number one, giving us the benefits of ability to jump in at any market opportunity, any point of the cycle.

It gives us the opportunity also to outperform any market sort of cycle.

whether it's an up market or down market or whether risk on market, risk off market, we have shown our ability to outperform consistently with our longshore capability.

Now as I touched on earlier the shorts sometimes if you find a high conviction short a company's share price is mispriced in our opinion sometimes we find these can add to the return quite substantially because simply there are just not that many longshore managers who has been around for this long

here in the Australian market.

So it is a sort of very niche space where there are not many competitors around.

And we have found that given our experience and our return in the Australian market, we have certainly found many, many opportunities on the shore side.

Where do you see the opportunity going forward?

Yeah, so over the next six to 12 months, we're seeing quite a few, you know, thematics, but we'll play through the markets.

Well, first of all, we will have the, you know, let's talk about China.

So China slow down has been quite drastic for a lot of our mining businesses.

And it's turnaround has been problematic, has been slow, but regardless, we are seeing green shoots of things getting better.

particularly its consumer, its travel services, as you expect, an economy coming out of COVID lockdowns.

But other parts of the economy, such as property and the like, it is now at least showing stabilisation, given the amount of policy stimulus the government has thrown at those markets.

So we are seeing early signs things are getting better.

Consumer in China is still very pessimistic because they're heavily leveraged to the housing, they're heavily leveraged to the share market, but the health of their consumer is actually not too bad.

They say they have a very low gearing rate, their interest rate has gone down instead of gone up compared to our consumer.

then they've got no inflation problem so you know with that combined the sentiment will turn it just require a bit of time so we think we're looking forward next 12 months that sort of space is actually looking quite interesting so resources companies certainly looks like given its underperformance in the last six months it certainly looks like it's a place the way you find quite a lot of return at the moment particularly

for businesses that large diversifies their own.

Some of those future facing metal, if like copper, for example.

So BHP itself, having walked away from Anglo American beads, you know, share price has fallen.

quite steadily more recently.

And it presents a quite a meaningful opportunity for investors with, you know, actually pretty low risk exposure by buying that, buying the China recovery, buying the copper face, copper exposure.

So we see that there's good opportunity.

We also see another part of the economy might be a little bit late, sorry, might be a little bit early,

but it's certainly something to watch.

We believe that consumer facing companies like the retailers heading into this reporting season will experience a lot more volatility because of the interest rate cut is not coming through this year because the earning might be too high because our consumer is in a tough spot at the moment.

So, you know, so I do think that retailers will experience pretty tough earnings downgrade this reporting season and for the next six months as well.

But this is your opportunity really to take advantage and buy some of those quality retailers because we do believe with the tax card, with the interest rate cut on the cards.

into next calendar year, these businesses will rally aggressively.

And it's really just, you know, average your way in and find opportunity and find the best quality companies and buy in those space.

And putting these aside, we also believe in having exposure to the AI growth globally.

It is a real thematic

There is limited exposure within the Australian market, but we have found quite a few larger businesses that have direct exposure to those areas.

some of the lower risk ways to play it, such as Goodman Group that has a huge pipeline of future growth coming from the data centers.

We've got Next DC.

These are some of the well-known names, but if you filter them, there is a couple of other smaller names they can look into.

So for us, the portfolio is a little bit of everything, but we do believe the cyclical part of the market will do better.

And at the same time, you've got to have exposure to some of those long duration growth companies.

Thanks, Dream Bay.

Thank you so much for having me, Angelina.