UBS is advising clients to exit Australian-listed banks and real estate stocks, urging increased exposure to mining and healthcare. The broker highlights a ‘three-pronged attack’ on the economy from elevated oil prices, escalating interest rates, and federal budget proposals impacting residential property tax. This fuels expectations of a further Reserve Bank of Australia rate hike, which would exacerbate property market pressures.
Strategist Richard Schellbach noted the budget raises the risk of a property market unwind. UBS’s analysis of past downturns showed banks and real estate lagged the broader market. Major banks like Westpac, developers such as Mirvac, alongside retailers reliant on housing-related spending and automotive businesses, are deemed vulnerable to a slowdown.
In response, UBS recommends an ‘overweight’ position in mining stocks such as BHP, Santos, and ALS, a lab testing company. Insulated industrials like mining services and defence are favoured. Healthcare, including Telix Pharmaceuticals, is seen as undervalued and defensively positioned. Hub24 and Aristocrat Leisure are also preferred. Several former preferred stocks, including Rio Tinto and Westpac, have been removed.
Meanwhile, Bell Potter is steering clients towards global equities, noting the Australian sharemarket’s underperformance against international peers due to rising interest rates and limited AI exposure. The broker recommends an ‘overweight’ stance on global equities, especially US tech giants, dominating with strong earnings and AI capital expenditure. Conversely, Bell Potter advises an ‘underweight’ position on the ASX, citing a narrowing path to a soft economic landing and caution on cyclically exposed sectors.
