Five ASX stocks to watch for August 2023

July was an eventful month for the RBA, with its decision to hold off on rate hikes drawing much relief from Australian households and businesses. The RBA also saw the appointment of a new governor, after incumbent head Philip Lowe drew heavy criticism for his management of monetary policy since the start of the pandemic.

Treasurer Jim Chalmers has opted to appoint current deputy governor Michele Bullock as Lowe's replacement once the latter's term comes to an end in September. The move may presage a shift in direction for the RBA's monetary policy, particularly given the perception that Lowe is being ousted due to the adverse effects of ongoing rate hikes.

Irrespective of the criticism Lowe has weathered, inflation in Australia for the June quarter fell comfortably ahead of expectations to 6% as compared to 7% for the March quarter The decline is likely a direct consequence the RBA's current cycle of hawkish monetary policy.

Some economists, such as Chris Richardson from Deloitte Access Economics, predict a drop in inflation to 3% by the first half of 2024, over a year ahead of the RBA's original forecast.

These changes could bode well for asset classes across the board – and equities in particular, if they create the conditions for the RBA to suspend rate hiking in the near-future.

An end to rate hikes will help contain borrowing costs for households and businesses, which could in turn spur economic activity and potentially enable Australia to curb inflation without succumbing to recession.

Now could be an opportune time for Australian investors to set their sights on ASX equities, given the possiblity of an imminent shift in the monetary policy environment. Here are five of the top stocks listed on the ASX as of August 2023.

1. Domain Holdings Australia Ltd (ASX: DHG)
2. National Australia Bank Ltd (ASX: NAB)
3. Orica Ltd (ASX: ORI)
4. Fortescue Metals (ASX: FMG)
5. Suncorp Group Ltd (ASX: SUN)

1. Domain Holdings Australia Ltd (ASX: DHG)

As the operator of Australia's second most popular online property platform, Domain is well-positioned to reap the benefits of any uptick in the housing market once interest rates start to ease.

According to a report from The Australian, brokerage Jefferies has recently lifted its rating for DHG to a buy, with a price target of $4.38.

DHG is currently trading at $3.92, after posting a decline of more than 47% since the start of the year.

2. National Australia Bank Ltd (ASX: NAB)

Melbourne-headquartered NAB has one of the most extensive overseas networks out of the big four Australian banks, with offices in China, North America and Europe.

NAB has also recently made bold forays into the fintech sector, announcing at the start of 2021 that it would acquire neobank 86 400, as well as unveiling cryptocurrency ambitions in January 2023 with plans to create the AUDN stablecoin on the Ethereum network.

Goldman Sachs is upbeat about NAB right now, anticipating 'volume momentum over the next 12 months as favouring commercial volumes over housing volumes.' According to Goldman, 'NAB provides the best exposure to this thematic.'

Goldman has a buy rating for NAB with a price target of $30.69. NAB's share price currently sits at $27.60, following a year-to-date decline of more than 6%.

3. Orica Ltd (ASX: ORI)

Mining and infrastructure company Orica says it offers a comprehensive range of services to companies in the resources sector, from explosives and blasting systems to cutting-edge digital solutions.

First founded in Victoria in the late 19th century, ORI has since evolved into a global entity with business operations in more than 100 countries around the world.

Brokerage Jarden Securities has recently changed its rating for ORI to a buy with a price target of $17.15. ORI's share price currently sits at around $15.60, after declining more than 7% over the past year.

According to ORI's FY23 half-year result, the company's underlying earnings before interest and tax (EBIT) saw growth of 32%, with revenue rising in all regions in year-on-year terms.

4. Fortescue Metals (ASX: FMG)

Iron ore giant Fortescue Metals saw its share price jump more than 4% to an intraday high of $23.13 on 25 July, after China unveiled plans to step up domestic demand in the second half of 2023.

FMG is especially well-positioned to benefit from any stimulus measures from Beijing, given the critical role that Australian iron ore plays in the construction of Chinese infrastructure. According to a report from Bloomberg, leading investment banks including Goldman Sachs have recently turned bullish on iron due to China's determination to keep growth on an even keel.

5. Suncorp Group Ltd (ASX: SUN)

Brisbane-headquartered Suncorp is Australia's largest general insurance group, having its origins at the State Accident Insurance Office for Queensland. SUN has since expanded into the provision of other financial services and established itself as a mid-size bank.

Both Goldman Sachs and Morgans have buy ratings for SUN, with 12-month share price targets of $14.53 and $14.44 respectively. Sun is currently trading just short of $14.

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