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Pockets of global uncertainty has an impact for many of Hanrick Curran’s clients so through our professional associations we’re pleased to provide access to an update and outlook on the prolonged period of political and economic unrest in Greece and by extent, the greater European Area. The anti-austerity Greek government has been in bailout negotiations with the International Monetary Fund and the European Central Bank. Thus far, an agreement has not been reached.

With few options remaining , the Greek Prime Minister implemented a national referendum to let the people decide through a “Yes/No” vote whether to stay in the European Union and accept five years of austerity measures.

Predictions of a close result were proved wrong. Counting started last night (5th July) and votes are indicating around 60% of Greeks are backing the “No” campaign with the margin set to increase as tallying continues. This vote suggests that a default by Greece will occur.

If so, Morgans Chief Economist, Michael Knox, predicts the following:

  1. The Greek banks will close while 11th hour negotiations continue with the Euro Group. Given the Euro Group would be in a position of not being repaid at all, this might lead to a partial payment from Greece which would allow them to stay in the Euro Area.
  2. Should an agreement not be reached, Greece would default on all its debt to the Euro Area. The Euro Central Bank would create a new currency for Greece and the country would exit the Euro.

Whatever the outcome, there will be more volatility in our market and in global markets generally. Today there has been a further sell-off in Australian equities with the All Ords index currently down 70 points to 5,450. Morgans currently have a fair value estimate of the ASX200 at 5,600 points, 150 points higher than today’s level. Consensus opinion among various brokers is that the index will be 6,000 by the end of this year.

Morgans expect any sell-off will be short term in nature, possibly only a matter of weeks. There are many leading companies now showing a dividend yield of 5% or more, and it makes these companies very attractive for investment.

If you would like to discuss the impact of these market conditions on your own portfolio please contact your usual Hanrick Curran adviser for an introduction to one of advisers at Morgans Tynan Partners.

 

Thank you to Michael Tynan for this content.

 

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.