London, United Kingdom
Mark Burgess, global co-head of equities,
Credit Suisse Asset Management
“We were generally positive on the outlook for resources and Asian-related investments in 2004. Our surprise has been the robustness of the Australian economy in recent years and therefore the breadth of performance over the past 12 months.
“We increased exposure to Australian stocks exposed to positive developments in resources and energy in the early part of 2004. Towards year-end, we reduced exposure in this area modestly, although we remained positive throughout the year.
“Australia remains moderately positive although we would expect to be reducing cyclical exposure during 2005. We see early signs of rising speculation in resources and energy, together with additional supply (in resources) coming to meet demand. This will encourage us to reduce holdings in this area throughout the year.
“We are generally encouraged over the medium outlook for Australian equities exposed to resources and energy where we see a continuation of a strong secular trend in the early part of this period.”
Atlanta, United States
Peter Osbourne, head of economic and investment research, Invesco
“Australia outperformed throughout 2004 but the fundamental analysis shows that Australia was at a more advanced stage of the business cycle.
“In late 2003, due to a tight monetary policy there was an expectation that economic and earnings growth in Australia would slow relative to the world during 2004, so we had a preference for some of the other markets that were more leveraged to global growth.
“We stand today just slightly under weight in Australian equities. If we get interest rate hikes as anticipated, we expect that economic growth would slow relative to other markets in the region and that would probably tilt our favour slightly towards other markets.
“In any environment, if the world is looking a bit more problematic — for example, US interest rates continue to rise and all of a sudden we’ve got a sharper slowdown in US global growth — then I think Australia will be favoured.”
London, United Kingdom
Steve Bell, global economist, Deutsche Asset Management
“We actually like the more cyclical markets so, although Australia is benefiting significantly from the Chinese growth story, it is generally seen as a more defensive market, so we would be expecting to increase our allocations later this year.
“We think that mid-cycle slow-down is close to running its course and that means the Asian markets are going to be more attractive. You wouldn’t expect the defensive markets to do so well in that context — although Australia has had a reasonably good start to the year.
“As we move through 2005, and the cyclical story gets more priced-in, we expect to get more defensive and buy the Aussie market, where we think commodity prices will stay high. We think the volumes will continue to be good, as there are lots of good fundamentals in Australia.”
Boston, United States
Ron O’Hanley, president, Mellon Institutional Asset Management
“The performance of the Australian market in 2004 certainly was registered. We had an asset allocation that was quite long on this market. I’m not sure if that has been pulled back now.
“The fundamentals of this country remain strong, but I don’t have a view on relative value. There has certainly been a good run-up.
“There are a series of very strong companies in Australia, many that are export-oriented, with strong balance sheets and very good profit rates.
“There is reason to continue to have optimism. The question is, has all that been priced into the market already?”
