What stocks has this famous broker identified as holds in a market downturn?


How will the local market perform for the remainder of 2014? Deutsche Bank has lowered end-of-year forecasts for the S&P/ASX 200 (ASX: XJO) from 6,000 to 5,700. They expect a mid-year pullback and a stronger finish to the year according to a report in The Australian Financial Review.

A softer Chinese economy and a slump in Australian consumer and business confidence as a result of the federal budget, all contributed to expectations for the mid-year retreat.

So What:

Potentially the stockmarket is entering a “risk-off” phase and the broker has reduced exposure to the mining sector, while maintaining full exposure to energy due to the number of liquefied natural gas projects coming on line.

Removed from the broker model portfolio were National Australia Bank Ltd (ASX: NAB), Orica Ltd (ASX: ORI), Macquarie Group Ltd (ASX: MQG) and Nine Entertainment Co Holdings Ltd (ASX: NEC). These were replaced by the potentially safer alternatives of Westpac Banking Corp (ASX: WBC), Suncorp Group Ltd (ASX: SUN), Sonic Healthcare Limited (ASX: SHL) and Westfield Retail Trust (ASX: WRT).

On a sector basis, the preference was for general insurers, real-estate, healthcare and utilities.

Now What:

Recent comments from the Reserve Bank and more recently the Australian Prudential Regulation Authority (APRA) suggest interest rates are likely to stay lower for longer. This should benefit quality yield stocks.

However, based on  a prior article entitled “Top 10 factors to topple housing stocks”, in my opinion exposures to real-estate exposed Westpac Banking Corp should be reduced rather than increased.

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Motley Fool contributor Mark Woodruff does not own shares in any of the companies mentioned in this article.

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