Australian investors need to seek bank stock substitutes when looking for growth or yield, says Australian Unity Investments.
In a note to investors, Australian Unity chief executive David Bryant said bank profits have been “soft”, and pressure on debt ratios and market growth were “expected to continue”, resulting in continuing uncertainty for investors.
“With such low interest rates there is also pressure on banks’ ability to maintain deposits and stem flows to equities and property, possibly putting further pressure on dividend policy,” he warned.
The statement came after the Commonwealth Bank recently revealed its cash net profit after tax had grown by 3 per cent in the 2015-16 financial year to $9.45 billion, which UBS Asset Management said was a “soft half” for the bank.
Mr Bryant said investors would be “wise” to diversify their portfolios, maintaining a degree of liquidity so new opportunities can be explored as they arise.
“This approach also helps to manage risk, but even the most cautious investors need to balance risk and return and look at other yield opportunities from reputable asset managers that can add to returns in a low yield environment,” he said.
Mr Bryant also noted that the recent increase in housing finance and consumer confidence were good omens for investors.
“If these trends continue, the outlook for Australian equities remains positive,” he said.
Aussies have an overweight exposure to property assets, increasing their risk to higher interest rates, an expert has warned. ...