Perpetual forecasts small caps for 2002

This year will see interest rates remain steady, the All Ordinaries register a modest gain and a stock focus on small caps, according toPerpetual Investments

The 2002 economic environment will also revolve around five risks including soaring oil prices due to Middle East tension, the collapse of Japanese banks, no significant increase in the Australian dollar and the US recovery faltering.

“I think it’s a case of watch this space,” Perpetual Investments investment markets research head Brigette Leckie says.

According to Perpetual Investments fixed interest manager Marion Kraemer, the Reserve Bank could make one more easing to interest rates by the end of this month but says the tightening of monetary policy this year is unlikely.

“Interest rate markets continue to be volatile but don’t expect any tightening of monetary policy,” she says.

Looking at the Australian equities market, Perpetual Investments Australian equities manager Peter Morgan says in the past 12 to 18 months, Australia has been one of the top performing markets.

“I believe Australia has been lucky, but we’ve also seen better management of corporate accounts,” he says.

Going forward, Morgan says with most individual company values full, Perpetual’s portfolio is skewed towards good cashflow positions where valuations are intact, such as the major banks, Publishing and Broadcasting Limited (PBL), Goodman Fielder and Tabcorp.

Other preferred companies highlighted were AMP and CSR. However, the fund manager had reduced holdings in BHP Billiton and RIO Tinto.

Morgan says while no collapse is expected, and the balance sheets are in control, the market place remains volatile.

“We’ve found it difficult to find areas in the market that stand out, like the tech stocks did. It’s a very choppy market place,” he says.