Australian Fund Managers Cautiously Optimistic Over Economic Outlook

Post by Sharat on June 25, 2009 · Under Australian Economy, Equities, Wealth Management, investments · Comment 

Australian investment managers have taken a cautious approach to the outlook going forward towards how quickly economic recovery will place and the impact of that recovery on equity markets.

Two large fund managers, Perpetual and Russell Investments have expressed different views, as retail investors exit the market.

In a survey of 41 investment managers from Australia, 25 expect the domestic Australian equity market to continue to rise, whilst expressing concerns over the pace of economic recovery.

Market strategist Andrew Pease of Russell Investments, says he believes that the fundamentals which underlie the equity markets suggested that equity prices would continue their upward march.

“(Fund managers) acknowledge that all the key ingredients needed to support an economic recovery in Australia, including government assistance, de-leveraging and risk re-ratings, are in place,” Mr. Pease said in a statement.

The data collected by Russell Investment shows that the rally in equity markets globally had produced optimism amongst managers so far not seen since before the start of the global banking crisis.

The survey also suggested that fund managers now believe credit markets to fully recover and function normally within a year.

The view taken by Perpetual differs markedly, with John Sevior, Perpetual head of Australian Equities expressing doubts over the underlying fundamentals of the global rally in equity prices which has occurred since March. Mr. Sevior says he believes that the market would start to trend sideways in the following months.

“The stronger than normal recovery since then was a reason to be cautious,” he said.

Mr. Sevior said it would take many years for companies to reduce their debt levels and that earnings estimates for the 2009-10 seem optimistic.

The outlook by both fund houses came against a back drop of new data which shows that fewer retail investors were participating in the equity market.

A study conducted by the Australian Securities Exchange (ASX), its 11th share investor study, that share ownership amongst Australians had declined by 5 per cent, with 41 per cent of adult Australians now owning shares, down from 46 per cent in 2006.

The proportion of retail investors who owned shares is second only to America where 45 per cent of the adult population own equities.

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