Cautious outlook for Australia

Australia remains a low growth market in a high growth region while the outlook for China remains sanguine, according to the global macro consensus from Credit Suisse Asian Investment Conference (AIC).

At the same time, AIC said it was cautious on developed market government bonds while the outlook for China was supported by strong housing investment and targeted wealth creation in Tier 3 cities.

Also, for the second consecutive year, the AIC consensus was cautious for Australia with expected sluggish growth which might become a headwind in the near term but it would not be a major drag on market returns in the long term.

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As far as the Aussie stocks were concerned, Chinese developers were bullish on Tier 3 city projects and believed the outlook would be supported by central government policy, with outbound tourism expected to grow at a double-digit pace.

According to Credit Suisse, investors are worried about the little growth available in the Aussie equity market.

“We find sharply higher bond yields have been a headwind for Aussie equities but a modest increase has not,” the firm said.

“However, while Australia provides little growth, there is plenty of quality, in our view.

“The improving quality of the investment landscape in Australia can be highlighted by the better current account position, stronger fiscal position, robust corporate balance sheets and conservative capital allocation process.

“However, each region has provided the gain in different ways. Australian companies improved upon an economic backdrop of six per cent per annum nominal GDP growth while Asia ex Japan could have squandered its faster growth backdrop.”

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