Inflation is over and the market has peaked
The market has reached its peak following a 35-year bull run, and inflation will cease to exist, according to Platinum Asset Management.
The firm's chief executive and managing director, Kerr Neilson said he was not an expert on market timing, but observed changes with quantitative easing, fiscal intervention, globalisation and capital flows, and that was why he thought the market had peaked.
"All of those types of questions start impinging on a market that has had virtual perfections. I am trying to define perfection and I can't think of any other factor that I could have added to that story line," he said.
Neilson said central banks were also controlling the yield curve for the first time in our lives and because of that, we would never see inflation again.
From 1991 to 2016, Asian industrial production grew just by nine per cent, while equities excluding Japan had also only doubled.
"That's a long time to achieve that return. And you will say, no, that's not possible. But what we saw in Asia was this massive winner from globalisation… and a huge divergence. Earnings grew by 10-11 per cent, but earnings per share grew at half of that level," he said.
"So it's not such a mystery [that markets have peaked]. Now we have capital intensity starting to lag off... but it is about the other factors that come into it."
Despite that, he was finding opportunity in Asia and technology stocks. His flagship international portfolio's largest exposures were also in Asia.
"We are playing these Chinese internets [companies] rather than US internets because they help themselves to their stock, and they have an ecosystem that is more so [sophisticated] than the US. These are very serious technology companies taking their own path," Neilson said.
He favored companies like Tencent, for their technological innovations and being ahead of the game with WeChat.
"They are not only interestingly priced, but they are doing interesting things and they will be more prevalent in Asia in due course."
Another Chinese company that he said he was buying into was 58.com, a listing service for online marketing.
"There are opportunities when people have no interest. It does make a difference if you have your wits about you in these extremes," Kerr said.
Kerr Neilson's comments were made at a Bloomberg event in Sydney.
Click here, to compare Platinum's international fund to its respective index.
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.
