Foreign funds flock to Australia

Instreet Investment

16 August 2016
| By Anonymous (not verified) |
image
image
expand image

The Australian market has seen an increase in capital inflows, as global investors searched for yield amid the low interest rate environment, according to Instreet Investments.

Instreet Investments' managing director, George Lucas, said with the amount of debt in negative yields at $13 trillion, it was no wonder investors turned to equity for yield.

"Thanks to years of continued investors activism, top Australian companies paid higher dividends and that helped to produce one of the highest yielding countries in the world.

"Compared to the S&P 500, which yields about 2.3 per cent, the yield from ASX 200 companies is attractive, resulting in foreign inflows and leading Australian companies being included in global yield ETFs listed in the US.

"It's not just equity yield that is attractive in Australia. The AAA rated government bonds are producing significant yield when compared to negative yields," Lucas said.

Foreign inflows had a positive effect on the Australian dollar, which was one on the rise despite the RBA cutting rates to record lows. As mortgage lenders were also not passing on the full rate cut to borrowers, the RBA's August rate cut was a completely waste, he said.

"If it is a weakening in the dollar the RBA are interested in, then they may think twice about cutting again."

Over in Japan there was further weakening and that should send a flow of yen into Australia as investors searched for yield. In addition to that, the Japanese equity market was at risk of becoming overvalued, as the Bank of Japan was going to buy more equity-linked ETFs, Lucas said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

3 weeks 4 days ago

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

1 month ago

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

1 month ago

Insignia Financial has confirmed it is considering a preliminary non-binding proposal received from a US private equity giant to acquire the firm. ...

1 week 3 days ago

Six of the seven listed financial advice licensees have reported positive share price growth in 2024, with AMP and Insignia successfully reversing earlier losses. ...

5 days 17 hours ago

Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equi...

4 days 21 hours ago