Investment managers bullish on local market

More than half of Australian investment managers believe the value of the S&P/ASX 300 is set to finish higher in 2012 than current levels, but remain weary of world market volatility.

That's according to Russell Investments' 'Investment Manager Outlook' for 2011, which examined the responses of 40 investment managers in relation to their expectations for the local market and what it may look like by 31 December 2012.

The results revealed that nearly 50 per cent of managers believed the ASX 300 would rise by 10 per cent or more, while only 2 per cent believed the market would end up down by more than 10 per cent.

The data reaffirms findings from Russell Investment's previous two market outlook surveys, which found that managers believed the local market was somewhat undervalued.

Russell Investments director of consulting and advisory services Greg Liddell said despite the positive outlook, managers identified a number of issues that were still affecting global investors and could pose a major threat to the Australian market. These included increased market volatility and the deteriorating situation in the Eurozone.

"Those managers who were more bearish on the local market outlook were primarily concerned about a contraction in Europe, and the repercussions that may have on global players including China and in turn, Australia," Liddell said.

He believes the recent 0.25 per cent interest rate cut by the Reserve Bank of Australia (RBA) last month had reduced investment managers' confidence in Australian bonds and cash, with both investment classes experiencing a reduction in the number of bullish managers and an increase in those who were bearish. 

Confidence in the consumer-related sectors, however, improved as a result of the rate cut and the anticipation of further cuts by the end of December, backed by a rise in manager bullishness to 50 per cent, up from the third quarter result of 35 per cent.

While the RBA's policy settings should ease as a result of their awareness of Australia's 'two-speed' economy, the possibility of policy mistakes amid a period of slow resolution for the European financial sector means local managers are ending the year on a cautious note, Liddell said.