The Sharemarket & The Looming Election


In hope of stable government

In the view of RBS Morgan and I thank them for this article their view, probably the best outcome from Wednesday’s leadership ballot was that the election is now more likely to be held earlier. While a Coalition victory would probably be better for the stock market, restoring stability within government is more important. In our view, a hung parliament has not served the nation well and the hope is that we see a clear winner when the election is eventually held.

Election timing  
The election must be held between 3 August and 30 November, and there is media speculation that it will be held around a month earlier than the date announced by the previous Prime Minister (14 September). In our view, bringing forward the election is good for the country. It has the hope to deliver a clear majority to the winner that gives them unequivocal power to pass legislation though the lower house. It’s more difficult to speculate on the composition of the Senate, but the change of Labor leadership probably makes it more difficult for the Coalition to control this house of parliament. Furthermore, any new Senators that will be elected this year won’t take their seat until 1 July 2014 and this means that even if the Coalition gains control of the Senate it will be difficult for them to pass legislation prior to that date.

Stock market implications  

Our previous note  on the prospects for equity markets from the election showed that there would be more benefits for investors from a Coalition victory. In particular, QUB could benefit from a private sector development at Sydney’s Moorebank intermodal freight terminal. However, there are also marginal benefits for BHP, RIO, FMG and QAN from the Coalition’s plan to repeal the carbon tax if elected. Our retail analyst thinks that CCL could benefit from any subsidy that the government might pay the food manufacturing industry

Click here for the full article thanks to RBS Morgan

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