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FIN3CSF Case Studies In Finance

tag 0 Download 7 Pages / 1,652 Words tag 24-11-2020
  • Course Code: FIN3CSF
  • University: La Trobe University
    icon is not sponsored or endorsed by this college or university

  • Country: Australia


1) Observation that the US market is at an all-time high value whereas the Australian market has yet to recover pre-GFC market index levels

  • May indicate that the US market is expected to underperform in the near future and the Australian market might relatively outperform
  • Although a momentum strategy might be consistent with the reverse belief
  • Investment actions based on the first expectation:

Buy large-weighted shares in the S&P/ASX 200 index

Buy shares in the Argo Investments LIC which provides diversified exposure to the ASX 200 index

Buy units in the Vanguard Australian share index ETF

Buy futures contracts on the SPI 200 or SPI 200 call options

Short-sell shares with exposure to the US market, such as construction companies such as Boral, CSR and James Hardie, QBE Insurance Group which invests in US Government bonds and Westfield which owns shopping centre properties in the US

Short-sell ETFs focused on the US market

2) Expect that the recent decision by the Reserve Bank of Australia to cut the official cash rate to 1.5% will further stimulate demand for lending and increase the lending activity of banks, resulting in an increase in interest income and increased bank profitability

  • Investment actions based on this expectation:

Buy banking firms such as Commonwealth Bank, Westpac Banking Corp, ANZ Banking Group and National Australia Bank, Bendigo Bank, Bank of Queensland

Buys shares in the bank-focused Milton Corporation LIC

3) Interest cut rate in 2) might also be expected to result in a depreciation in the Australian dollar

  • Investment actions based on this expectation:

Buy shares in export-based companies, such as Graincorp, iron ore mining companies such as BHP Billiton, Rio Tinto and Fortescue Metals Group

Short-sell import-based companies such as Harvey Norman and JB Hi-Fi

Buy ETFs based on overseas currencies, such as BetaShares US dollar or BetaShares Euro ETFs

4) China continued growth strategy

  • Investment actions based on this expectation:

Buy shares with exposure to China activity such as iron-ore exporting companies (BHP Billiton, Rio Tinto, Fortescue Metals Group), vitamins (Blackmores), casinos (Crown Resorts), wine (Treasury Wine Estates)

Buy shares in the Platinum Capital LIC, which has an Asian focus

Buy shares in an international ETF, such as the Vanguard MSCI World index

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Total 7 pages

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