Global economic news is largely positive but it seems that Australian investors are increasingly pessimistic, says David Bryant, chief executive officer at Australian Unity Investments.
“Most of the key overseas economies have had good news in the last week but this doesn’t seem to be reaching local investors.
“Consumer confidence in Australia is down, with figures released last month showing it was down two percent to ‘mildly negative’ territory.
“The forthcoming federal budget and election also bring uncertainty.
“But overseas, the news has been brighter. For instance, the China Purchasing Index showed increased expansion, up another two percent, with growth in both manufacturing and services.
“The US services sector also showed healthy expansion and the Eurozone Purchasing Manager’s Index (PMI) was up this week.
“But despite these green shoots, the Australian market is struggling and remains volatile.
“Low commodity prices are spooking investors who continue to wait for a bottom to be reached.
“And concern about banks’ ongoing strength and profitability, in light a potential increase in bad loans, is weighing on investors’ minds.
“This is no doubt exacerbated by this week’s news about the continuing issues with culture within the banking environment.
“These fears aren’t unfounded. Certainly Australian banks are struggling for profit growth, and previous earnings targets of around ten percent are unlikely to continue, and are more likely to be half that.
“Indeed, five percent growth would be a good result in the current environment.
“On top of this is the much lower profits for resource stocks, and it’s hardly surprising that investors are seeing limited options in the local sharemarket.
“The variation between good and bad companies is becoming clearer and, while this means that investors must remain vigilant and do their research, it also presents good opportunities for those investors willing to take the time to find the right options,” Mr Bryant said.
Mr David Bryant
CEO Australian Unity Investments
T: 03 8682 4550 (via EA Siobhan Henderson)