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A slightly merry new year

Christine St Anne  |  07 Jan 2013Text size  Decrease  Increase  |  

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Christine St Anne is Morningstar's online editor.


The European debt crisis, US growth problems and Australia's uneven two-speed economy were among the dominant investment issues playing out in 2012.

Amid this global and domestic uncertainty, those who steer investment funds are slightly optimistic about Australia's investment outlook.

Fifty per cent of chief investment officers (CIO) expect Australian equities to perform well in 2013, according to the Financial Services Council's CIO index for the December quarter.

At the same time, an equal proportion of CIOs have a neutral view, although none of the CIOs surveyed believed Australian equities would perform poorly in the new year.

Overall, CIOs have shown a slight increase in confidence in the investment outlook for Australia, with the December-quarter result slightly up from the September and June quarters.

The CIO index has now recorded two successive quarters of improving sentiment.

"Action by the Reserve Bank of Australia and a general view that macroeconomic conditions are improving, and will continue to improve in 2013, is giving CIOs greater confidence than in the June and September quarters," Financial Services Council chief executive John Brogden says.

Investment managers were also confident the demand for equities would increase as the appeal of term deposits and cash falls in line with falling interest rates.

One CIO who was surveyed said: "The appetite for equities has been weak for over five years and sentiment will turn as other asset classes falter and term deposits and cash start to look less appealing."


Short and long-term concerns

Surprisingly, the outlook for growth in China was not cited as a concern among investment managers. In fact, it was barely mentioned in the survey.

Instead, these managers nominated political risks in Europe, the United States and Australia as the key short-term risks, particularly the European crisis.

The most significant long-term risks were the high levels of debt and the way European countries and the US will deal with this debt.

Some CIOs are concerned about the impact the austerity measures may have on global demand, while others cited the extreme difficulty in unwinding debt positions of sovereign governments.