“There is nervousness looking forward ... We are going through this transition from mining to non-mining and any transition causes nervousness,” portfolio manager of the Fidelity Australian Equities Fund Paul Taylor told an audience of financial advisers in Sydney.
Mining is not “falling off a cliff” and there is time for the economy to adapt, according to Fidelity.
“There is a time lag of six, nine, 12 months and it will be smoother than people think, as we do have that time,” Mr Taylor said.
Australia has had almost 22 years of uninterrupted growth and has been through similar transitions in the past, the funds management firm pointed out.
“Australia is a structural growth story [and] the engine of Australian growth is much more about the domestic economy and the drivers of that,” Mr Taylor stated.
Fidelity believes other areas of the economy can fill the hole left by the decline in mining investments.
“Lower interest rates and a lower Australian dollar will stimulate other areas of the Australian economy ... [For instance] a lower dollar opens up a lot more domestic tourism opportunities,” Mr Taylor said.
Fidelity also pointed out “corporates have become a lot more concerned,” about this transition and are acting to improve efficiencies.
Mr Taylor does concede that this will be a tighter investment environment going forward.
“We are in a low growth world and we need to think about that when we make our investment decisions,” he said.
Thematically, Fidelity said this will involve “a total return strategy” and finding stocks that have “yield plus growth”.
Furthermore, Mr Taylor called on investors to “get back to basics” and find that combination of good management and growth potential.
“You need good quality management to navigate choppy waters ... and the value of quality management intensifies during this period,” he said.
