There has been an increase in bullish expectations for Australian shares, international shares and Australian real estate investment trusts (A-REITs), with 64 per cent of Australian investment managers maintaining their view that the Australian share market is undervalued.
This is one of the main findings from the Russell Investments ‘Investment Manager Outlook’ report, which also found managers ranked the rate of China’s growth as the most important factor in portfolio construction. This was followed closely by the level of the Australian dollar, fiscal developments in Europe and the interest rate outlook for Australia.
Russell managing director of consulting and advisory services Greg Liddell said concerns about China appeared to be unfounded, and pointed to its lower relative public debt compared to the US and Europe.
Furthermore, stronger domestic demand was one of the reasons for not discounting China as yet.
The "risk on" theme of the managers also carried on to the equities sector, with "traditionally defensive sectors such as consumer staples, telecommunications and healthcare all experiencing a rise in bearish sentiment", Russell stated.
"The rate cuts towards the end of last year have made the environment more attractive for cyclical stocks which managers are generally seeing as fairly valued, if not cheap," Liddell said.
"A-REITs also experienced a surge in positive sentiment, with 42 per cent of managers viewing the asset class favourably."
