FYI | Dec 01 2008
By Chris Shaw
Global financial markets remain volatile, but this is not stopping professional investors from becoming more positive. The December quarter Russell Investment Manager Outlook survey shows 54% of fund managers responding are adopting a bullish stance on Australian equities. This compares to just 27% for the same period last year.
Managers are equally bullish with respect to international equities, as the survey shows 49% are now bullish compared to 30% of managers at this time last year. Cash is the major asset class to suffer, as only 13% of managers now prefer this class compared to 52% in the December quarter of 2007.
The change also reflects the perception there is now better value on offer in the Australian equity market. The group’s investment strategist Andrew Pease notes 56% of managers responding in the survey viewed Australian shares as undervalued at present. This compares to just 11% this time last year and only 16% in the June quarter of this year.
Of those to respond, 32% view the market as fair value currently, while 12% continue to see the market as overvalued at present levels. In sector terms, Pease notes 47% of managers to respond are bullish on the healthcare sector, while only 8% are bearish. 46% are bullish on industrials against 23% bearish. Both the IT and telecommunications services sectors enjoy 42% bullish views, against bearish view of only 18% and 25% respectively.
The listed property trust sector is also enjoying something of a return to favour, as while 45% of managers remain bearish, the number of managers with a bullish stance has risen from only 9% in the fourth quarter last year to 40% now.
In contrast, the consumer discretionary products and materials sectors both fell out of favour somewhat. The former is now seeing 54% of managers taking a bearish view against 38% in the September survey. The latter experienced a 14% decline in bullish managers as well as an 8% decline in bearish managers.
Smaller caps stocks have also suffered in recent months, as Pease points out only 34% of managers are now bullish on the sector. This is down from 57% in the September quarter and well below the 47% of managers that are not presently interested in investing in the sector.
Opinion is far more mixed with respect to financials, as the survey shows 42% of managers are bearish on the sector, which is down from 50% this time last year. Those taking a bullish stance have increased from 19% last year to 44% now.
Outside of equities there appears to be a view value is on offer in the Australian dollar, particularly against its US counterpart. The survey shows from just 9% of bullish views on the currency pair in the third quarter of this year there are now 45% of managers with a bullish outlook. This is the highest level in the history of the survey. Bearish views have fallen accordingly, from 65% in the third quarter to just 26% now.
Managers are not turning strongly bullish though, in Pease’s view, as the survey shows 38% of managers remain bullish on Australian bonds. While this is down from previous levels, it does show a continued defensive approach, as until the fourth quarter of 2007, this sector had not recorded more than 20% of bullish managers.
