Morgan Stanley and Housing Market

housing market: Its "bear case" scenario has the ASX200 tumbling to 4,200 points, a 14 per cent fall from current levels on top of the 12 per cent slide the market has endured since its April peak. "The bear case is one centred on recession risk, while the bull case is one of significant fiscal policy reversal — which at present seems an elusive ideal rather than a tangible option," Morgan Stanley told its clients. "Our Base case for the next 12 months for Australia is one of increasing stagnation in both economic activity and corporate earnings profiles." The Morgan Stanley thesis is that the unwinding resources boom will continue to have a negative impact on industrial sectors while the housing cycle may have already peaked, according to Australian Broadcasting Corporation. Morgan Stanley Chris Nichol said: "Australia growth dynamic looks familiar on the surface, but with housing now being reined in, we disagree with the consensus that 'next year will be better'." "Policymakers are now putting the brakes on the housing market through macro-prudential policy measures, and we expect they will prove successful in slowing price growth and construction activity, with some impact on related-consumption into 2016. "Our Bear case scenario is one that is filled with stagnation and recession — a scenario that has an economy stalling under the weight of a resource unwind that relies too much on housing as the only game in town." Morgan Stanley five lessons from reporting season Caution to remain in outlooks: Morgan Stanley said there was little incentive for companies to provide upbeat outlooks. After a disappointing reporting season, Morgan Stanley strategy team has cut its 12-month forecast for the key ASX200 index from 5,650 to 5,150 — a downward revision of 9 per cent — roughly in line with current levels. Anxieties in Europe over Greece, coupled with a volatile situation with a cooling China and a stagnating domestic economy have conspired to deliver an overwhelming message of caution. Watching offshore earners: The Australian dollar remained remarkably resolute through the recent bout of China inspired global volatility, only showing a degree of weakness last week. The banks need to raise more capital while earnings are under pressure: "With ANZ and CBA raising equity over the season, the need and outlook for capital was well crystallised for investors," Morgan Stanley bank analysts noted."The ANZ update confirmed that credit quality should be assessed keenly; this, combined with a regulated slowdown in lending growth means the upgrade cycle is well and truly over". Resources: Morgan Stanley Chris Nichol said resource companies now look cheap, but without some stability — or indeed positive momentum — in the commodities they sell, the much-looked-for rotation into this sector remains elusive. (news.financializer.com). As reported in the news.