ASX equity shrinking

From Chris Pash:

Credit Suisse’s Equity Strategist Hasan Tevfik says the cost of debt is very low relative to the cost of equity….This means that few equities are being added to the Australian market because companies are using cheap debt, rather than going to their investors or shareholders, to raise cash for expansion or investment.

This is not a healthy sign — when companies use cheap debt, rather than equity, to fund acquisitions. Artificially low interest rates distorting companies’ WACC (weighted average cost of capital) could lead to poor investment decisions.

Read more at Credit Suisse: This Is Why The ASX Will Hit 6000 By The End Of The Year | Business Insider.