Certain industries and economic sectors are making a comeback, representing solid investment opportunities, as a result of the Australian dollar reaching its peak, according to an economist and chief investment officer of a recognised funds management firm.
“One of the things that has changed in our investment thinking most recently is the idea the Aussie dollar has probably capped out,” Platypus Asset Management chief investment officer Donald Williams said.
“So the double-digit headwind we’ve seen for the last three or four halves will disappear completely unless the currency goes to US$1.10. What that does mean for investors is high-quality companies like some of the international healthcare companies, such as CSL and ResMed, all potentially came back into play as decent investment ideas.”
Williams said CSL was a great example of a company with solid operations and solid results that had seen the value of its results adversely affected by the continued appreciation of the local currency.
However, while his attitude towards some international companies was optimistic, the outlook for the domestic equities market remained gloomy.
“From our perspective there is still very little interest in Australian equities per se from the domestic investment community, both from the wholesale side and the retail side,” Williams said.
He predicted if that sentiment was to change, it was more likely to be led by institutional investors than retail ones.
“I think the All Ordinaries Index has to really get back over 5000 and look like it’s going to stay there before retail investor confidence really improves,” he said.
The situation could prompt a lowering of interest rates later in the year if domestic economic data did not improve, he said.
“If you don’t see a gradual pick up in the retail and housing sectors by June 30, if the Aussie dollar is still over par, I think we’ll see the Reserve Bank try to re-stimulate the economy,” he said.
