Australian investors will continue to be challenged by the global low-growth environment, requiring them to identify companies trading below intrinsic value in order to gain growth opportunities, says Martin Currie.
In a recent economic outlook, Martin Currie pointed out that investors in global markets are facing a number of challenges, and therefore need to focus on companies trading below their intrinsic value in order to access growth.
Martin Currie said investors “coaxed” into the market tend to favour stocks with low-beta, stable prices and cash-rich earnings.
“As a result, we see a wide divergence in the market’s pricing of expensive, low-beta assets versus cheap, economically sensitive assets."
The investment management firm said investors in the current environment need to differentiate between cheap stocks with the potential for earnings to recover and stocks that will continue to face challenges generating earnings.
Martin Currie noted that the key for investors is to focus on companies trading below their intrinsic value, rather than be driven by macro factors.
“Consequently, our investment style is most successful when investors are focused on the fundamental value of underlying securities, rather than the times when short-term sentiment (such as risk aversion) governs the market’s decisions.”
Martin Currie said its confidence lies in the consumer discretionary sector, which it expects to benefit from a weaker Australian dollar and lower interest rates. The firm also indicated that opportunities lie in construction stocks and non-bank financials.
Moreover, stocks that offer exposure to China's growing middle class and consumer spending are "appealing", the firm said.
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