T. Rowe Price takes 'glass half full' outlook to Australia
Australia has a strong fiscal backdrop as the country moves to re-open following the COVID-19 pandemic, according to T. Rowe Price.
In a monthly update on its global asset allocation, managers Richard Coghlan, Randal Jenneke, Thomas Poullaouec and Wenting Shen said there were several factors which presented near-term tailwinds for the country.
These included the small number of total cases, sustained decline in the spread of the virus and move by the Government on support measures.
The firm also suggested the stockmarket performance failed to adequately reflect the actions taken so there could be a “catch-up rally” in the future. T. Rowe Price was currently neutral on Australian equities as they had experienced recent underperformance but, over a one-year period, the firm said the cyclicality of Australian equities should play in their favour.
“The Australian Government has taken swift action to contain the outbreak, resulting in a relatively small number of cases within the country and a sustained decline in the virus spread. So, while many other countries still remain in lockdown or have extended movement restrictions, Australia has instead moved to reopen its economy ahead of schedule.
“Pent-up demand and the need for inventory restocking as business activity comes back online should provide near-term tailwinds for the economy. That comes on top of considerable policy measures from the Government and the Reserve Bank of Australia that were deployed quickly and aggressively.
“Fortunately for Australia, the country’s fiscal position was stronger than other countries entering the current crisis which we think could lessen the long-term risks of this unprecedented level of accommodation. Importantly, it may also leave further room to unveil new support measures if needed.”
However, it was not entirely a positive situation as the country was likely to be hit by the slowdown in migration as a result of the travel restrictions, dividends on Australian equities would be cut, valuations were stretched at historical highs and it was subject to retaliations from China.
Performance of T.Rowe Price Australian Equity fund versus ASX 200 over one year to 30 April, 2020
Recommended for you
Platinum Asset Management has put its two closed-end funds under strategic review in a bid to reduce the share price discount to pre-tax NTA and maximise shareholder value.
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.