Arcus starts to get bearish
If they are not turning bearish just yet, there is at least an ominous growling from Arcus Investments at its quarterly briefing yesterday.
Tuesday, March 20th 2007, 5:02AM
by Rob Hosking
He points to heightened local risks in the market, more attractive assets in Australia, and riskier global growth markets.
Arcus is tilting its allocations away from global equities and more towards cash.
Closer to home, changes to the investment tax regime, which put some Australian investments on a par with New Zealand investments, make the Australian market more attractive. Arcus chief economist Rozanna Wozniak says the Australian economy is looking in better shape than New Zealand.
Forward earnings per share in Australia is at 7% compared to 3% for New Zealand: GDP is 2.7% compared to 1.5% a year locally, and domestic spending in Australia is running at 3.5% compared to minus 2.6% for New Zealand.
“Australia is also a bigger market, there are more opportunities but with lower risk.”
Adding to the local risk is a recent run of profit downgrades for local firms and the high level of household indebtedness.
Brighouse says there is a risk of the herd mentality leading people to make mistakes, and that people cannot expect the double digit returns of the past few years to continue.
“Convincing people four years ago there were now some good opportunities in the market was hard, they were saying 'I will take it out and put it in the bank and get 6%' or whatever. That was when there were opportunities.
“People making mistakes about the value of things is what makes the opportunities for active investment managers and we see plenty of that going on.”
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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