Australian Investment Blog

Over the last month the ASX200 has rallied 2.4% but the insurance sector slipped 0.4%, this comes as the local bourse continues to be nerved by future margins. Insurance companies clearly carry an inherent risk by the nature of their business and when badly managed, as we have witnessed over recent years by QBE, can be a treacherous place to invest. Hence personally, I want to see real value before investing in this vulnerable sector. Overall I believe earnings risks to the sector are to the downside and stock prices are being supported by the almost panic chase for yield. Interestingly I have very different technical views on the main stocks in the sector:

1. AMP Ltd (AMP) – $6.60 – AMP has benefited by the decent gain in equities, I remain short term positive, targeting 5% further upside. – chart 1.2. Insurance Australia (IAG) - $6.02 –IAG holds ~20% of shareholders’ funds in equities. My technical view of a decent retracement (ideally after a spike towards 6100) over coming months coincides with my negative target of sub $5.50. – chart 2.3. Suncorp Group (SUN) $13.44 – SUN only holds ~16% of funds in equities, hence less market risk. However, the stock is extremely crowded with “yield chasers” after recent “special dividends’. I am technically negative, targeting sub $12, a further 10% decline. – chart 3.4. QBE Insurance (QBE) $13.68 – A lot of investors have recently been buying this massive market underperformer as its earnings benefit from a weaker $A plus rising US interest rates. I am neutral the stock here which has arguably got a little ahead of itself. – chart 4.