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Note from the MD: Why global investors may turn up Down Under

Where might global investors look for returns in today’s volatile, high-inflation world? Australian equities are the answer, according to several pundits.
Where might global investors look for returns in today’s volatile, high-inflation world? Australian equities are the answer, according to several pundits. Both AMP Capital and Commonwealth Bank see the Australian share market recovering this financial year to outperform its global peers. The ASX 200 fell by 10.2% over FY22, and ended down 13.9% from the all-time high it set last August. But the optimists have been right so far this financial year: the ASX 200 finished up 2.26% last week to close out the first month of FY23 at an almost seven-week high (up 5.7%) – its second-best monthly performance in the past 18 months. In its latest Year in Review, Year in Preview report, CommSec tips the Aussie share market to grow by 7-9% this financial year, and rise 5-8% over CY23, outperforming other countries as global growth slows. Economist Shane Oliver comes to a similar conclusion about the relative attractiveness of local equities in AMP Capital’s latest economics report, predicting Australian shares will deliver 5% dividend yield and capital growth of 3.7% over the medium term (5-10 years). Add in franking benefits, and the total return is 10.2%. Per AMP’s forecasts, Australian shares will beat all other asset classes – the closest rival on an international basis being Asian shares (ex Japan) with a total return estimate of 9.7%, followed by global shares with a total return of 7.5%. The caveat on Oliver’s rosy outlook is that inflation needs to be contained, and the RBA is determined to do just that, lifting the cash rate by 0.5% to 1.85% yesterday, the first time it has done so at four consecutive meetings since the introduction of its 2-3% inflation target in 1990. We have an upcoming webinar with a company that has no direct competition in a target market comprising $423 billion in small business loans, when 38% of Australia’s 2.4 million small and medium enterprises (SMEs) are actively looking for new solutions. Propell Holdings Limited (ASX: PHL) is an SME-lender with a digital-first approach that has helped the company grow its footprint across Australia, recently achieving a record quarter for lending volumes and a >320% year-on-year increase in its customer base. Tomorrow at 12pm (AEST) we will be joined by Propell CEO Michael Davidson for what we think will be a fascinating conversation for potential investors about Propell’s offering and business plans for the future. Click here to attend.
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