Jonathon Ross: Hello and welcome to the T. Rowe Price Australian equity update. Today I'm joined by Randal Jenneke who's Head of Australian Equities and Portfolio Manager for our high conviction Australian equity portfolio. Randal it's been a pretty strong quarter that we've just seen. What's been the highlights for you over the last three months or so?
Randal Jenneke: Thank you. It has been another strong quarter. The Australian equity market was up close to 8%. It was quite interesting because we had a number of key events that really I think drove markets during that quarter. Firstly, we had the federal election. We had the surprise results. The coalition government won. And then we had the RBA cut rates pretty much straightaway. And APRA also eased lending standards. I think those things really boosted the Australian equity market. We saw banks perform particularly well as some of the tail risks around housing were removed.
Randal Jenneke: We also saw that more dovish tone from I guess central banks in general, both in Australia and globally also set a more positive tone for the equity markets. I guess the one lingering uncertainty is still around trade. We had the G20 at the end of the quarter and that remains I think one of the key tensions going forward. But all up, it was a very strong quarter for Australian equities and most markets around the world.
Jonathon Ross: In terms of positioning then and outlook for the next few months, how are you seeing things? We're obviously entering into earnings season very shortly.
Randal Jenneke: That's right. One of the things that we are noticing is that we've seen earnings been revised downwards for the last three and six months. So short term we're actually quite cautious. We're at the start of earnings season in the US and locally in Australia, we'll head into earning season in the next month.
Randal Jenneke: We do think that it is a time to be a bit more defensive and a bit more cautious. Now part of that is because markets have done very well. Year to date we're up 20%. It's the best six-month period since 1991, but earnings have been revised down. So that's typically not a great combination. We are a little bit cautious going into the August reporting period, but we do think that as we get into the latter half of 2019 and into 2020 that actually the setup looks pretty good because we're going to have the RBA rate cuts start to impact the economy and also fiscal stimulus work its way through the economy as well.
Jonathon Ross: You mentioned being a bit more cautious. What levers do you have available to you? Is that increasing the quality of the portfolio or is that increasing cash? What do you typically do when you get a bit more cautious?
Randal Jenneke: What we've done is we've increased quality within the portfolio, so the A-rated component of our portfolio, or the highest quality part of the portfolio now represents roughly 47%. It's its highest level it ever has been and that does reflect the fact that we are a bit more cautious in the short term. And we've been able to do that by adding some new names over the last quarter. We've added APA Group into the portfolio. We've Added Xero to the portfolio. We've added REA Group to the portfolio and also taken some of the other A-rated names higher as well in terms of their positioning. We've taken the opportunity to take advantage of some of the mispricings that we see over the last three to six months. And we do think that that more cautious positioning will set us up well over the next six to 12 months.
Jonathon Ross: Thanks Randal, and thanks very much for listening in. If you've got any further questions please feel free to reach out to your local institutional relationship manager. Thank you.
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