Australian equities have good return potential

australian equities term deposits global financial crisis bonds portfolio manager

3 February 2012
| By Andrew Tsanadis |
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

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 3 weeks ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 3 weeks ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 3 weeks 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....

1 week 3 days ago

The Reserve Bank of Australia's latest interest rate announcement has left punters disheartened on Melbourne Cup Day....

1 week 2 days ago

The Federal Court has given a verdict on ASIC’s case against Dixon Advisory director Paul Ryan which had alleged he breached his director duties....

1 week 1 day ago