International equities to dominate in 2003
International equities will once again rise to the top in terms of investments performance with an expected 13 per cent growth over the next year, outstripping domestic equities with 7 per cent growth and property forecasts of 9 per cent.
The predictions have been made byMacquarie Funds Managementwho say the boost in international equities will come about as company profits in the US increase and central banks in Europe and the US ease monetary policy.
But despite the projected increase for global equities MFM head of asset allocation Robert Credaro says market sentiment would be susceptible to large swings for some time.
He says this is the result of many investors, up to March of this year, being over-enthusiastic about recovery after last year and that confidence has disappeared as US and European indices have fallen sharply to five year lows.
As a result, the mood is now more pessimistic and Credaro says this pattern will remain in the market for some time. While strong returns are available as confidence returns to the market, local investors could still be hit by a rising Australian dollar unless funds are hedged.
“In Australia, the resilience of the economy has translated into robust profit expectations and a relatively well-behaved equity market. But with some downward pressure already emerging in areas such as advertising, retailing and housing-related sectors, profit growth in the core industrial companies may prove to be weaker into 2003,” Credaro says.
“In addition, banks will be pressured by slower lending growth and mining companies will feel the pinch of a stronger Australian dollar. All up, the Australian equity market is not as well valued for such a weakening in profit momentum as many international markets.”
In the other asset classes Australian bonds are tipped to return only around 3.5 per cent and global bonds 3.0 per cent over the coming year but bond yields would increase on the back of growing confidence in global growth expectations.
Looking over a 10 year time frame, Credaro says global equities and property trusts are still likely to provide the best return, each at 8 per cent per annum with Australian equities not far behind with an expected return of 7 per cent per annum over the longer term.
AUTHOR
Jason Spits
Recommended for you
AUSIEX has announced it will acquire FIIG, a specialist fixed income provider with $4.5 billion in funds under advice.
Platinum Asset Management has announced it is in discussions with a global alternatives fund manager regarding a possible merger to create an $18 billion firm.
Frontier Advisors has bolstered its Japanese footprint through a partnership with the $350 billion asset management arm of Nippon Life Insurance Company.
JP Morgan Asset Management has appointed an ETF specialist from Vanguard as it seeks to expand its ETF range.
