Aussie investor safe haven set for resurgence

Sale items

Opportunities still abound for Australian investors as equities continue to trade undervalue, according to an equity fund manager.

While the ASX may have offered positive returns for seven of the last eight years, DNR Capital chief investment officer Jamie Nicol says the Australian equity market continues to look cheap.

“This is an extended run by historical standards and the price-earnings multiple of the market is trading towards the upper band,” Mr Nicol said.

Despite this, the market has not experienced the enthusiasm of previous runs.

“It has been characterised by cautiousness, lower interest rates and strong support for defensive assets, such as property and utilities,” he added.

However, while Mr Nicol pointed to the potential for an inflationary US under President Trump, it will be up to Australian investors to pivot accordingly.

“A critical question for investors is whether inflation is accompanied by faster growth. Either scenario – inflation or inflation plus growth – is negative for bond yields and defensive assets,” he said.

“An inflationary environment [is] one where corporate margins are likely to decline, especially for lower quality companies with little pricing power,” he explained.

Given this, Australian investors should look for those companies that will perform well in such an environment.

“We are inclined to continue to seek quality companies with earnings upside and we are exploring opportunities among cyclical industries. Cyclicals are trading below their average price to book,” Mr Nicol said.

“In addition we expect opportunities will emerge to buy good quality growth companies over the next quarter as the market continues to rotate away from these names.”

Promoted Content
Recommended by Spike Native Network
MORE FROM NEST EGG
Superannuation, super fees, superannuation member, member fees, Rice Warner, retirement savings, retirement planning, wealth management
Jun 23 2017
Superannuation fees likely to decline
Superannuation member fees have fallen by almost a quarter of a percentage point in the last 10 year...
SMSF, Colonial First State, CFS, June 30, EOFY, End of Financial Year, trustees, non-concessional contributions
Jun 23 2017
Organise electronic transfers early, urges Colonial First State
SMSF trustees need to organise transfers for non-concessional contributions well in advance of next ...
Zenith, BlackRock, Vanguard, fixed income, bonds, bond investing, fixed income investing, bond fund, Jon Howie, Andrew Yap, Nathan Zahm
Jun 23 2017
What rising interest rates mean for bond funds
The capital value of your bond portfolio will take a hit as interest rates begin to climb, but the a...