Recent changes to the Blended Australian Equities Portfolio & Australian Equities Income Portfolio
Increasing Commonwealth Bank of Australia (CBA)
A powerful combination of policy responses to address Australia’s languishing economy and housing market has prompted us to add to our position in Commonwealth Bank. Stimulatory policy intervention has been delivered in three forms. First, the Federal Coalition victory provides scope for personal income tax cuts and policy support for first-home buyers. Second, APRA’s proposal to remove the serviceability floor rate applied to home loans could potentially increase the borrowing capacity for owner occupiers and investors. Third, Philip Lowe’s (Reserve Bank Governor) address this week that the RBA will consider the case for lower interest rates at its June meeting.
We would contend that the enlisted policy measures provide an important foundation for the stabilisation of the housing market and hence should be beneficial for the banking sector.
Increasing Ramsay Health Care (RHS)
We have added to our position in Ramsay Health Care. A major headwind has been removed for the Private Health Insurers and Private Hospital operators following the outcome of the Australian Federal election.
The regulatory risk posed by the ALP’s proposed cap on private health insurance premium increases at 2% for two years has now been removed. With the Coalition government retaining power, a more favourable pricing regime is expected for both the private health insurance and private hospital operators. Moreover, we would expect that the Coalition would be more favourably disposed in supporting measures to address the decline in the private health care insurance participation rate. Importantly, such measures should underpin improved price and volume outcomes for Ramsay’s Australian operations.
It is also evident that Ramsay is starting to see the benefits of more favourable operating conditions in its UK and European operations supporting improved volumes and tariff pricing.
Overall, Ramsay Health Care provides a globally diversified exposure to the underlying growth fundamentals of health care services.
Selling Senex Energy Ltd (SXY) We have sold the holding in Senex Energy. The oil price has rallied strongly for four consecutive months and we have decided to reduce the portfolio’s exposure to the sector. Moreover, we are conscious that there is a growing likelihood that an LNG receiving terminal will be sanctioned on the east coast, which will facilitate the import of seaborn gas into NSW for retail and wholesale markets, thus providing additional supply into the market.