Australian equities have good return potential

australian equities term deposits global financial crisis bonds portfolio manager

3 February 2012
| By Staff |
image
image
expand image

Australian equities are quite cheap at the moment, but the return potential is particularly high going forward, according to Fidelity Worldwide Investment.

Speaking at a media briefing yesterday, Fidelity portfolio manager Kate Howitt said that global stocks are not looking particularly attractive at the moment, but the market dividend yield for Australian equities is currently sitting around 5 per cent.

While Howitt concedes that the price to earnings ratio for Australian equities is the lowest ratio since the early 1990s, she said bonds and term deposits are only short-term solutions to building strong retirement savings.

"Bonds have been quite low, so the risk there is that the yield you're getting on the bond is not going to get you where you need to go," she said.

"The return rate for term deposits in Australia is around 5 per cent pre-tax, but there is no capital growth to help you offset inflation."

The four major issues looming over most markets are the events in Europe, the US, China and the rise of the Australian dollar, said Howitt.

On a positive note, she believes the boost to liquidity in both Europe and the US is likely to strengthen the Australian equities market, while global markets are unlikely to find themselves in the grip of a major downturn in confidence and activity if Greece were to pull out of the euro zone.

In regards to China, she said that while China has been investing sub-optimally for a number of decades, the growth in infrastructure projects is providing significant scope for investment.

"Our market is cheap but none of us feel like jumping in to buy," Howitt said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

13 hours 57 minutes ago

Interesting. Would be good to know the details of the StrategyOne deal....

4 days 19 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 2 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 4 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

3 days 17 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

2 days 20 hours ago