More managers warm to global equities

A Record 80 per cent of Australian investment managers now favour global equities over every other asset class, according to the March 2006 Russell Investment Manager Outlook (IMO) survey.

The swing to global equities during the March 2006 quarter represents the strongest result in either direction for any asset class in any quarter since the survey’s launch last year.

It also represents the third successive quarter that the 52 surveyed Australian investment managers have taken an increasingly bullish stance on the 12-month outlook for global equities.

The number of managers bullish on global equities in the March 2006 quarter is up from 67 per cent in December 2005, 51 per cent in September 2005 and 49 per cent in June 2005.

Respondents are equally divided over the 12-month outlook for broad market Australian equities, with 31 per cent bearish, 37 per cent neutral, and 31 per cent bullish.

Sentiment to Australian equity valuations has changed little since the previous quarter, with 52 per cent nominating the market as ‘fairly valued’, 42 per cent as ‘overvalued’, and only 6 per cent as ‘undervalued’ at current levels.

Russell’s chief investment officer for Asia Pacific Peter Gunning said prevailing sentiment appeared to be driven by two forces, a more cautious stance towards the current level of Australian market valuations, and a more bullish outlook to offshore growth expectations, particularly in the US.

However, in spite of bullish sentiment over global equities during the past year, Gunning said these markets on average had not lived up to managers’ return expectations relative to the Australian market.

“While Japan, emerging markets and European equity markets — particularly Nordic markets with large oil exposure — have performed well, the US equity market has lagged, effectively clouding investors’ decision-making,” he said.