A group of Australian fund managers are bullish on overseas markets, bearish on Aussie banks and increasingly fearful about the impact a new Labor government could have on financial markets.
Speaking at a breakfast roundtable at the Crestone Wealth Management Investment Forum on Wednesday, Ellerston Capital portfolio manager and head of global macro Brett Gillespie, warned that nobody is considering what a Labor government could mean for the Australian financial system.
“If you think about the fact that they are going to get rid of negative gearing on existing properties, that could be the game changer for the housing market here,” he said.
His comments come as the Turnbull government is locked in a leadership crisis following the resignation of several senior cabinet ministers following a Liberal Party leadership spill on Tuesday that Turnbull narrowly won 48-35.
“I think it will be a very big impact on the housing market if Labor stops negative gearing, which is in their policy platform, so the banks will be very exposed,” Mr Gillespie said.
“I don’t think you can talk about the Australian stock market at the moment, particularly the banks, without considering who will win the election and Labor is ahead in the poll at the moment. It’s a game changer for the whole equities space. It’s quite massive and no one is really talking about what will happen in the economy and in the equities space if a new government comes in.”
Mr Gillespie warned that “it’s not going to take much to tip this housing market over at the moment."
He said: “The first trade will be ‘Oh my God, housing is in freefall’.”
Invest in overseas equities
Also speaking at the Crestone event, Perpetual’s Anthony Aboud urged Australian investors to shift their mindset and broaden their horizons to international markets, which he sees as undervalued and offer more investment opportunity than Australia at the moment.
“Rather than us deciding whether we should buy BHP or NAB, we need to broaden the investment horizon of the individual and help educate them that they can invest globally, rather than just pick between NAB and BHP,” Mr Aboud said
“Unfortunately, what will happen, it will come after the Aussie dollars falls and the banks have had a housing cycle that everyone says, ‘I need to dramatically increase my exposure not to’. That mindset will come once the dollar is at 55 cents and the housing market has fallen off a cliff. I guarantee it will happen.”
More regulation is not the answer
When it comes to investing in bank stocks, Mr Aboud acknowledged the risks, given the political landscape and the ongoing royal commission. He said that the Hayne inquiry will ultimately lead to more compliance and regulation, increasing barriers to entry for new innovative players.
UBS Asset Management’s head of fixed income, Anne Anderson, described the nation as a “nanny state” and warned that we have to be “very careful” about principles-based regulation.
“More regulation should not beget more regulation. I think that’s important. So hopefully cool heads prevail at the Hayne inquiry. Meanwhile, as an investor, there are much better investments in some of the European banks.”