Fund managers report the global economy is experiencing synchronised growth, but caution that companies listed on the Australian Securities Exchange (ASX) will be closely watched for earnings details and any outlooks during reporting season.
In 2017, the top 20 stocks on the ASX returned 7.3%, while the ex-20 stocks returned 18.7%, according to Bennelong Funds Management’s investment partners.
Julian Beaumont, investment director at Bennelong Australian Equity Partners (BAEP), thinks “the biggest risk for markets is a material jump in interest rates”, and adds that with Australian 10-year government bond yields around 2.8%, “this seems to be some time off”.
However, particularly for Australian exporters and for global businesses, he says “a question mark hangs over whether the Australian dollar will strengthen”.
Justin Blaess, portfolio manager at Quay Global Investors, agrees “the Australian dollar is a wildcard in the mix”.
He says global real estate returns for Australian investors were “negatively impacted by a strong dollar in 2017”.
Global infrastructure demand
Greg Goodsell, global equity strategist at 4D Infrastructure, says private sector financing will be an essential element of future projects if global infrastructure needs are to be met.
A rapid expansion of the middle class, particularly in Asia, is likely to change consumption, which could mean greater demand for food, housing, education and healthcare facilities and more people travelling, increasing the need for airports and roads, for example.
“At the end of 2016, there were 3.2bn people in the global middle class,” Goodsell says. “That will increase by 160m each year for the next five years. In all, 88% of the next billion entrants into the middle class will reside in Asia.”
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