As lower interest rates loom, here are 6 ASX stocks that will benefit from forthcoming rate cuts

Here 6 ASX stocks that will benefit from lower interest rates!

AGL Energy (ASX:AGL)

You might think AGL is on this list because people will have an easier time paying their electricity bills. Not quite for two reasons: First, Blind Freddy could tell you that, and Second, people are still paying their bills. We were thinking more from the angle that lower interest rates will make it easier for AGL to pursue a financing package to fund its clean energy ambitions.

You see, the stock is largest carbon emitter, accounting for 8% of Australia’s national carbon footprint. And even if it had no plans to go green, it would need to replace most (if not all) of its old coal-fired power plants. Forget about raising all $20bn or so with equity finance and/or its balance sheet, AGL will need some debt finance. And rate cuts might be the straw that breaks the camel’s back in making it commence the search. After all, the clock is ticking towards FY35, when it aims to achieve Net Zero.

Macquarie (ASX:MQG)

Macquarie has been able to perform throughout all market conditions since first setting up shop in Australia in the late 1960s, growing by close to 7% annually. Despite having a growing consumer lending and retail business, investing remains its bread and butter. With substantial exposure to funds management and investments in the green energy transition, it is well poised to benefit because rate cuts will make it easier to invest. Of course, its retail business will benefit too, being well poised to grab a higher share of the market offering lower rates, but not taking the hits the Big 4 would due to legacy costs plaguing the Big 4, but not Macquarie.

Mirvac (ASX:MGR)

You could stick any property stock on a list of stocks that will benefit from rate cuts but we picked Mirvac because it is one of the most prominent stocks, and we think has some upside. There is some argument to be made that it could be a lose because of its exposure to BTR (Build to Rent) apartments which may be less popular if buying housing becomes more affordable. That being said, we think any loss will be offset by the benefits. Mirvac has a $29bn development pipeline, and rate cuts will give management one less headache, because there are a lot of them plaguing the construction sector right now – read: supply chain issues.

OFX (ASX:OFX)

OFX is a forex provider that is B2B-focused – just under 70% of its revenues are now B2B. If there’s more money to go around, it will mean there is a requirement for services like OFX. Businesses that need forex services will need them regularly. Clients want competitive pricing, high standards of security, the ability to manage volatility risk of forex exposure and the ability to speak to a human being when things go wrong (not a chatbot) and OFX provides this enhanced service.

Qantas (ASX:QAN)

The travel sector has been fascinating to watch. Despite travel demand coming back, many companies’ share prices have not because of intense competition in the sector, as well as concerns about demand amidst cost of living concerns. Rate cuts will put the latter to bed. But Qantas is poised to benefit because of the new long-haul flights it will be launching under the Project Sunrise banner. It plans to charge a premium price for non-stop flights between Australia and New York and London. Lower interest rate cuts mean more money to take that special trip.

Australian Ethical Investment (ASX:AEF)

One of the losers of rate cuts will be people who opt to keep their money in savings and term deposits, rather than invest it. Australian Ethical Investment is a unique fund manager, being focused on ESG, and managing to grow its FUM at a time when so many other money managers (particularly Magellan) have gone backwards. We also observe that Australian Ethical likes investing in technology and healthcare companies, two sectors that could be winners, both because of investor sentiment that would follow from rate cuts, but also because customers who put ‘big ticket projects’ on hold will come back.

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