Stock pickers listen up: Australian equities are looking reasonably priced and they're likely not going to move in unison any more, Deutsche Bank says.
According to a note by the bank, the stockmarket's large correction this year has resulted in price-earnings ratios falling beneath historical levels.
And the sharemarket's current price-earnings ratio of 15 is around 5 per cent below Deutsche's estimate of fair value.
The "fair value" PE ratio was in fact at its highest in a decade, reflecting the lower Australian dollar, below trend earnings and "reasonable" earnings revisions, the bank said.
But there are three other reasons why the market is currently a good buy, said the bank:
- Over decades of history, 15 per cent corrections have resulted in a market bounce in the following six to 12 months provided no recession ensues.
- Inflows from superannuation funds should continue to support the market.
- Policy uncertainty in China and the US has dropped, said the bank, "which should help equity valuations".
Restructure - Tuesday, page-23
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