Dealer group Hillross Financial Services has boosted its recommendation on Australian equities after the S&P/ASX 200 Index’s May slump made valuations more attractive.
The AMP-owned firm raised its tactical view on Australian shares to overweight from neutral.
“The decline in share prices over May has pushed valuations back into the cheap zone,” Hillross chief economist Brad Matthews said.
“While there are some doubts over the direction of commodity prices, non-resource company prices appear very sustainable against a backdrop of a stable domestic economy and low company debt.”
The S&P/ASX 200 fell 7.5 per cent in June over concerns about the potential fallout from high European government debt and the government’s intention to introduce a 40 per cent resource super profits tax on mining companies, Matthews said.
Hillross also cut its recommendation on international equities from overweight to neutral.
“Although valuations appear attractive on most overseas developed share markets, government debt management issues lift the potential risk of a worst case scenario,” he said.
“Recent declines in the value of the Australian dollar have also reduced the relative value on overseas markets.”
Government bonds were also cut to underweight from neutral as yields were below fair value and provided no compensation for medium term inflation risks, Matthews said.
“Opportunities remain in credit, which appears superior to sovereign debt on a risk adjusted basis,” he said.
Hillross has 300 advisers in over 100 firms across Australia.
