By Greg Peel

When US bonds started to move on Fed taper talk in May, the Aussie went first. When the Aussie started to go, the foreign exit of Australian stocks, held for yield differentials, was quick to follow. Falling stock prices and a falling currency affect a double loss for US investors. A feedback loop was then established, and on it went, with Japanese investors also chiming in.

It is a frustrating scenario for local investors holding local stocks, particularly if those investors were late in trying to ride the early 2013 rally. It's not such a frustrating scenario, nevertheless, for those still sitting in cash wondering when an opportunity might arise to get in.

Macquarie sums it up succinctly: "The lower A$ profile significantly improves the Australian market's earnings outlook". For so long companies and industries have been whinging about the Aussie. They need whinge no more.

Citi is a little more restrained, suggesting the recent decline in the Aussie has been substantial enough that, if sustained, should "contribute usefully" to market earnings growth in FY14. Aggregation of currency-based gains and losses amongst listed companies suggests the currency alone could account for 3 percentage points of 10.5% net profit growth now expected for the period.

The biggest winner will be the resource sector, notes Citi, which should contribute 7ppt of the 10.5. That's assuming constant commodity price forecasts, of course, among other factors. The industrials ex resources will only contribute 1ppt given the offset of currency losers, such as importers and airlines, among the winners.

That figure is nonetheless conservative given it largely reflects only the changing balance of offshore revenues, earnings and costs under a lower Aussie, all other things being equal. It does not account for any increase in sales volumes that might flow from more competitive pricing, for example, or the impact of Australian consumers redirecting their spending back to the domestic market. For individual stocks, such impacts can be substantial.

Macquarie's assessment of the industrials sector (ex resources, banks, REITs) throws up several stocks which continue to trade at a discount to the sector despite the benefits that will flow from a lower currency. They include Computershare ((CPU)), QBE Insurance ((QBE)), Ansell ((ANN)), Amcor ((AMC)), Sonic Healthcare ((SHL)), Orica ((ORI)), Incitec Pivot ((IPL)) and News Corp ((NWS)) in its current form.

Those stocks with significant earnings downside include Qantas ((QAN)) and Virgin Australia ((VAH)).

In the resources sector, the biggest winner is BHP Billiton ((BHP)), Macquarie attests. The analysts were already keen on BHP given its renewed productivity focus. When BHP's FY13 and FY14 earnings profiles were being downgraded previously, it was all about lower commodity prices which were not being offset, as is traditionally the case, by a lower Aussie. This time around, the falling Aussie is providing a boost while commodity price forecasts are not at this time being downgraded.

Under Macquarie's new AUD profile, which sees a 2013 average forecast of US$0.92 down from US$1.02, the FY14 market PE ratio falls to 13.2x, below the long term average of 14.2x.

Goldman Sachs has looked at the small cap sector. If the Aussie continues to fall, and the Australian economy weakens further, small cap stocks with offshore earnings could become safe havens, Goldman suggests. Highlights would include Macquarie Atlas Roads ((MQA)), Henderson Group ((HGG)), Cardno ((CDD)), Breville Group ((BRG)) and BT Investment Management ((BTT)).

Looking at the falling Aussie alone, and assuming no economic change, Goldman sees the prime small cap winners as Select Harvests ((SHV)), Cardno, Matrix Composites & Engineering ((MCE)), Ardent Leisure ((AAD)) and Henderson.

Losers are Pacific Brands ((PBG)), GUD Holdings ((GUD)), The Reject Shop ((TRS)), Premier Investments ((PMV)), OrotonGroup ((ORL)), Super Retail ((SUL)) and Kathmandu ((KMD)), which unsurprisingly are all imported goods retailers.

FNArena has published multiple stories in past weeks about the likely impact from a weaker Australian dollar for Australian companies. Below are a few stories to revisit the theme (sorry, access for paid subscribers only):