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Australian equities attractive in 2012
A robust Australian economy amid global market turmoil means pockets of good growth will be found in the Australian equities market in 2012.
That's according to Fidelity Australian Equities Fund portfolio manager Paul Taylor, who said the Eurozone's fiscal black hole will lead to slower global growth and a prolonged recovery period, ultimately having an impact on Australia's currency, exporters and consumer demand. Despite this, he believes several Australian companies remain in "good shape" and are "growing well", and investors need to look for structural growth opportunities.
"Stocks that can provide both growth and yield will be bid up by the market," Taylor said.
"There are several listed companies that are paying dividend yields that are well above that of bank term deposit rates, and these will increasingly be in demand from investors seeking consistent income from the market," he said.
In regards to world economies, the outcome of Euro zone talks, the current - if only slight- economic momentum of the US economy, and the current policy debate and slow economic growth of China will continue to play a significant part in the next year, Fidelity Worldwide Investment portfolio manager Australian equities Kate Howitt said.
"A stronger US dollar, ongoing restrictive Chinese policies and lower Reserve Bank of Australia cash rates would weaken the Australian dollar, while reflationary moves by either the Federal Reserve System or the Chinese authorities could easily see the Australian dollar sustained back above parity for much of the year," Howitt explained.
Howitt believes that property and cash will no longer be the stand-out asset classes in 2012, paving the way for investment in local equities.
"We know that our banks are some of the strongest in the world, corporate gearing is at 30 year lows and earnings are generally below cycle-peaks, with the market offering reasonable valuations, yield support, solid fundamentals and the potential for reflationary policy moves," Howitt said.
"These factors suggest it may not be too long until we are back to 2009 where there was a greater risk to 'not' holding equities."
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