China growth should boost Australian equity markets
The Australian economy and its equity markets should have a healthy 2014, according to a Fidelity portfolio manager.
The most important factor is that the Chinese economy is showing signs of growth again.
"Overall Australia remains one of the fastest-expanding economies in the developed world. The country has the highest population growth rate among the OECD economies, which should continue to support domestic consumption over the medium to long-term," Pak-Luan Yeoh from Fidelity said.
Yeoh predicts the growth in China will foster demand for Australia's mining exports.
Yeoh said the modest recovery in the United States and healthy growth appearing in Asia should prove a boost for Australia.
Yeoh added equity markets may not be cheap but solid cash flows and balance sheets mean Australian stocks will offer attractive dividend yields, making Australia an appealing "total-return" story.
Fidelity Global Equities Fund portfolio manager Amit Lodha said while there are signs of a pickup in China, it is too early to know whether this is cyclical or structural.
Globally, he said the economy looked stronger, adding that while the jobs and housing recovery in the US is well-recognised, a similar expansion could be seen in non-residential construction. He predicts a capex revival, which could lead to cyclical recovery.
He also said a cyclical recovery in Europe could mean strong inventory restocking cycle in the first half of 2014.
"In Japan the determined implementation of Abenomics could ensure that what happens there has a bearing on broader global markets after nearly two decades of stagnation," he said.
He also said there is less value in the market even though equities remain cheap compared to other classes.
Where markets will head would depend on a revival in corporate confidence, which has been low so far due to uncertainty around fiscal issues and interest-rate risk.
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