Currency awareness crucial
Boutique fund managers need to make their investors more aware of what impact currency moves might have on their returns, according to the senior investment analyst at Prime Value Asset Management, Fiona Clark.
The smaller end of the investor market is probably not as aware as the larger end of the market of the impact currency moves may have on the earnings of listed companies, Clark said.
“Hedging probably went out of favour five or 10 years ago, so I think you would find that a lot of Australian corporates have very unhedged financial positions, so they would be suffering, and a few of them are making profit downgrades as a result of that.
“As a whole, I don’t think the Australian investor has fully comprehended that,” Clark said.
Fund managers should be warning their investors that many Australian listed companies generate earnings offshore and are susceptible to changes in currency,” she said.
Prime Value executive director Y. Yong Quek added that a short-term hiccup in China could drive the Australian dollar downward.
However, certain industries such as the resources companies would not be as affected by currency fluctuations, because the price of resources was going up anyway, Quek said.
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