Global equities offer more investment opportunities than local market
Australia's two-speed economy is helping to boost the return rate of local equities, but global equities are presenting more opportunities through technology and consumption.
Speaking at the Fidelity 'Battle of the Asset Classes' forum, Fidelity Australian equities portfolio manager Kate Howitt said she believed Australia's economy was quite flexible and global growth - particularly in the Chinese market - should support Australia's mining earnings.
She added that both the externally driven mining sector and internally driven household sector have traded off well over the past two decades, and this has provided stability and growth to Australia's gross domestic product.
"History has shown us that when growth in mining sector starts to fade we should get an easing of monetary policy and a rebound in the other sectors of the economy," she said.
The Australian dollar is also strong, with its purchasing power on parity with the US. Howitt said the Australian dollar was looking more attractive to overseas investors because of the debasing of other world currencies, particularly the euro and the US dollar.
According to Fidelity global equities portfolio manager Amit Lodha, there are many more market opportunities in global economies than the Australian economy is currently presenting to investors.
The US outlook is looking a lot brighter than 18 months ago, and the resurgent growth of the US housing market is a particularly strong economic indicator which will provide a stable base for further growth, he said.
He said that while there was some weakness in 2011, the next 30 to 40-year period would see emerging markets provide investors with many avenues for growth.
These would include better and more varied opportunities to invest in technological innovation, infrastructure investment and telecommunications. Consumption would also be a key driver in the growth of global equities, particularly in countries like India.
"The one fly in the ointment that we all need to keep our eyes on is the oil price - if things get worse in the Middle East it is going to be a big tax on consumption growth and a big tax in emerging markets," Lodha conceded.
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