Sunset Strip | Aussie Afternoon Institutional Market Wrap

Aussie market started negative with CBA raising and then it ran into China devaluation part 2 which was followed by substantial broad based selling pressure post lunch from a potential global investor out of Asia. The market was caught completely unaware by the PBOC move to devaluate Yuan yesterday and it was shocked by the devaluation today. Regular readers would know that we have been saying this move was inevitable for the past few weeks and we remain of the view that there is more to come. Pardon the pun, but “Yuan should not expect China to work the same way as developed open markets”. The rate cut cycle in Australia is over after the recent currency move and asset bubble worries. We are going into another 12-18mth of flat interest rates. The market is now showing value and the risk return points to buying time!!! Shorts were being covered today on stocks that should have underperformed as market is expecting recovery from these levels. (VIEW LINK)