What Australian Finance Group Might Tell You on Aussie Property


You may have read conflicting reports around Aussie property.

Some call a bearish view. Others are bullish.

It can be confusing. What to do? Who’s view to follow?

There is a way out of this mess.

Bring up a relevant chart.

What you read, can sometimes be misleading. But the chart (more often than not) will bring you to the truth of the matter.

But there’s another reason to read the economy through the charts.

And it’s this…

Often you get to read the news months in advance, before you read it in the press.

And here’s yet another example…

Remember when we profiled Adelaide Brighton last month? All the news on building approvals was gloomy. It was crisis time.

Building approvals fell across the board for a straight 23 months. And the Property Council of Australia was demanding urgent action from all levels of government.

Anyway, here’s an excerpt from that update…

The share price has been falling, along with the fall in new building approvals.

But here’s why we think we might be nearing a bottom for building approvals. Bring up the chart for Brickworks Ltd [ASX:BKW], for example.

It’s busting into all-time highs. That’s telling you something about the housing construction market. It suggests that building approvals might soon see the low. And then the next cycle will get into full swing.

And so what does the New Year bring?

News that building approvals are soaring across the nation once more.

See how you can forecast news well in advance?

Making these types of forecasts is no great skill. Just basic chart reading.

The market just has a knack of knowing.

Anyway, let’s profile another stock related to property.

Mortgage stocks are particularly sensitive to property. So we could look at Australian Finance Group Ltd [ASX:AFG], for example. They’ve grown to become one of Australia’s largest mortgage broking groups.

These days mortgage brokers are responsible for almost six in every 10 mortgages, in Australia’s trillion dollar home loan market.

Let’s bring it up. Here’s the weekly chart:

Port Phillip Publishing

Source: Optuma

[Click to open in a new window]

Despite all the bad news last year on building approvals, the trend was up. And has been strongly since May last year.

Remember the market is not reacting to data from two months back. It’s always looking ahead. Factoring in future conditions as best it can.

What now for AFG?

Well, the share price this week found resistance around the prior high. That’s nothing surprising, a common occurrence on the charts.

But you could follow it from here. See if it brings in a higher low on the chart.

The share price found support at $2.35 or so last month. And is meeting resistance around $2.95 or so. That gives you some reference points to work with.

The company will report half-year earnings in February. Should we get a strong break below the prior low, revenues could be softening and the good news might already be in.

But should we get a strong break above $3 or so, it might suggest the company will report strong revenues half-year. And it might just tell you a thing or two about the Aussie property market as well.

Anyway, if you want to keep up to date on what’s happening in markets and a whole lot more, you can subscribe to the Profit Watch newsletter here.