Matt Williams, a portfolio manager at Airlie Funds Management, is of the view that the insurers are already preparing for the introduction of this policy and that the question investors must ask is whether the health insurers, or the hospitals, will have the upper hand in negotiating prices.
Health a focus
Who has the upper hand will determine whether the insurers can operate under this policy without a hit to their bottom line.
Mr Williams points out that insurers are already looking to reduce claims and keep people out of hospitals with a focus on greater recovery at home and other alternatives. The recent profit result from Medibank Private showed tight cost control.
Williams is also surprised that neither party has as yet committed to policy to write down the value of the National Broadband Network, thereby potentially reducing the price that NBN wholesalers, and by extension consumers, pay for their internet access.
He believes it is likely that whoever wins the election will write down the value of the NBN. Such a writedown would be broadly positive for the telecom sector as it could lead to higher margins for telecom companies which have struggled to generate a reasonable return from reselling NBN services.
This is unless the price reductions were “competed away” in a highly competitive environment.
Nathan Bell is also concerned about the effects of policy changes to consumer behaviour.
He says: “Labor’s main policies all act as a tax on consumers. We’ve already got a recession on a per capita basis, so these policy changes will reduce spending. Non-discretionary retailers, including Woolworths and Coles, recently reported weak earnings growth.
“These policies could see growth evaporate altogether. People will find ways to cut their spending by buying more discounted groceries; shopping less often; buying more generic brands; and avoiding small treats. Imagine what that then means for discretionary retailers, such as Harvey Norman and JB Hi-Fi.”
Energy
The Coalition’s energy policy has ensured that the share prices of Australia’s energy retailers have been heavily discounted on the concerns of electricity prices being capped or companies broken up.
Labor leader Bill Shorten late last year also contributed to the uncertainty in energy policy, suggesting the ALP will redirect east coast gas earmarked for export to the domestic market if certain price levels – which weren’t disclosed – were reached.
Australia’s gas producers have export contracts to deliver gas that usually spans decades. Investors are right to be concerned if a government considered mandating that export contracts be put at risk to fulfil domestic demand.
Williams believes that this uncertainty is creating opportunities to buy energy companies that are cheap as a result. It’s hard to be definitive about how to position investments for the federal election at this stage, given that both big parties haven’t really put many cards on the table.
What ends up being legislated is often not necessarily what is promised during an election campaign, so investors need to make sure that they don’t overreact before the election.
One thing, however, is certain: populist politics and business bashing is with us for the moment, and is likely to have material ramifications for investors. Investors must respond by paying more attention than usual to this year’s federal election.
General advice only. Mark Draper is a financial adviser with GEM Capital Financial Advice.
from Trendy Newses https://ift.tt/2HA3UND
0 Comments