Battle for Investors Favour Bank and Miners Clash
It has been like this since day one, and banks and mining companies are turning everything they can to gather favorable results from the bigger faces of investors. Although it has been already the lifetime favorite because of its strong earnings performance and a positive outlook, questions were raised as to who would emerge as the top sector in the year ahead.
The Australian Market has been covered by the two sectors, with each having designated higher indexes. Banks made a whopping 29.7 per cent of the benchmark index, the S&P / ASX 200 and miners with at least 19.2 per cent according to The Australian News.
The big index sizes of the two sectors are hugely exposed in the superannuation accounts of retail investors, along with Telstra and firmly on the radar of powerful overseas institutions. Some of the resources sector, which are commonly made up of miners, oil and gas producers and steelmakers, is the strongest performer in the index, as miners reaped the benefits for higher prices and production.
While the prices are higher because of its growing Chinese demand and the BHP Billiton-led charge that had set aside the long overdue iron ore pricing system, which had open doors for BHP, Rio Tinto and Fortescue Metals Group to hold its record prices.
Rio Tinto and BHP’s record continues to put investments in expansions but it is the latter that is still gaining its larger volume this year and at a higher prices, even if the Rio Tinto’s record had reached around a net profit of $US5.8 Billion (up by 125 percent on a year earlier).
However, Commonwealth gained as high as $US6.1bn cash earnings which wraps up this month, this has been a record for an Australian Company to date. In the reporting season just past, Westpac reported $1.4bn cash earnings, compared with ANZ Group’s $1.3bn and National Australia Bank’s $1.1bn.Despite the record performance, Commonwealth boss Ralph Norris warned that the future was uncertain and volatility on global financial markets showed no sign of ending.
Although bank analysts are still seeing that the credit growth in Australia will remain subdued despite the low earnings forecasts. And other banks such as Deutshe Bank and Westpac’s earnings forecasts has either cut or lower net profit forecasts by 2012 and 2013.
Analysis of the major banks by Goldman Sachs shows the sector has a one-year forward earnings ratio of 10.9 times, compared with resources at 11.5 times. The S&P/ASX 200 is trading on a forward earnings ratio of 11.8 times. Earnings per share growth for the big four banks is expected to reach 22 per cent in their current financial years, before slowing to 17 per cent, reflecting downgrades after the profit season.
