Corporate debt provision key to share market recovery

The retreat of foreign banks from Australian shores represents protectionism and must be counterbalanced by the provision of debt from corporate institutions, according to Tyndall head of equities Bob Van Munster.

With foreign taxpayers funding their governments’ response to the financial crisis, there is the expectation that funds will be used at home to stimulate domestic economies. As a result of this shift, Australia’s local banks are struggling to keep up and companies are now coming to the fore for the provision of debt, Van Munster said.

This is a key concern for investors in 2009, with the debt deflation cycle needing to be broken before the share market and other asset classes can recover.

Tyndall deputy head of equities Warwick Cumming said the market now has a renewed focus on the debt profile of companies. The president of the Australian Direct Property Investment Association (ADPA), Linden Toll, said debt is looming as a critical issue for his members. Toll said his members alone have around $10 billion due for refinance in 2009-10. ADPIA represents $60 billion worth of the direct property industry, of which approximately $20 billion is debt funded.

The property industry body has welcomed the Federal Government’s recently announced Australian Business Investment Partnership, a $4 billion commercial property assistance fund.

Under the scheme, the banks and the Government will provide funding for commercial property projects, including office, retail and industrial properties, if lenders withdraw from the Australian market.