Australian equities to offer muted returns for 2007: Tyndall

Investment management firm Tyndall is predicting more subdued returns from the Australian equities market in 2007, which will be evident in the first half of the year.

“Half of our universe of stocks . . . are unlikely to achieve risk adjusted returns that can better cash over the next few years. There are still some pockets of value, but the market is getting increasingly difficult for a fundamental investor like ourselves,” Tyndall head of equities Bob van Munster said at an industry presentation.

The “pockets” according to van Muster include sectors such as energy, consumer staples, infrastructure, materials and banks and financial services.

“There are pockets of value in energy as people are assessing the oil prices moving down, but there will probably be better buying opportunities in the future as oil prices continue to ease back,” he said.

Tyndall’s head of equities also highlighted areas of the market he would prefer to avoid.

“Sectors that are probably overvalued in our view include consumer durables, where we thought they were cheap last year, media stocks in particular, which have been bid up strongly on takeover speculation, and also in the retailers, where . . . last year the market became too bearish on retailers and we now think they’re getting too optimistic,” van Munster explained.

“Listed property trusts look to every player in Australia to be expensive . . . and some pockets of the resources sector also look expensive to us,” he added.