Delegates at a Fidelity Worldwide Investment investor roadshow earlier this week have nominated Australia as the best market to look for yield but believe it lacks global opportunities when it comes to capturing themes such as technology, energy and consumption.
Portfolio manager of the Fidelity Global Industrials Fund Amit Lodha and Australian Opportunities Fund portfolio manager Kate Howitt presented the case for global and Australian investments respectively across the five key themes before the 320 delegates were asked to vote on which they were more convinced by.
The Australian case was strongly preferred for yield with global investments for the rest.
Delegates agreed with Ms Howitt’s argument that quantitative easing globally had driven down bank stock yields in many markets with bonds also overvalued and returning negative real yields.
Liquidity dams are also filling up and global corporates need to reduce their gearing, Ms Howitt said. Australia also benefits from companies that don’t have large capital expenditure burdens around reinvestment, such as Telstra, she added.
However, delegates supported Mr Lodha’s case for global investments as a better long-term investment. There are currently changes underway in global demographics which will create opportunities and emerging markets have the potential to accelerate, he said, although the Eurozone still has some major hurdles.
In terms of energy, the US is now close to self-sufficient for its energy needs with increased shale production there in recent years, especially due to technological innovations. On the other hand, energy projects in Australia have seen higher costs, with costs too great for some new projects to get off the ground, he said.
In the technology space, Ms Howitt said that although most major providers like Google, Amazon and Apple were overseas, there were plenty of local companies that had exposure to the sector’s growth.
However, Mr Lodha argued that the majority of the profits in the sector are earned by major companies such as Apple. He also said much of the innovation in the space takes place overseas and identified other potential winners in the value chain, such as glass manufacturers who provide the screens for smartphones and SBA Communications, which makes antennae for wireless service providers.
