Speaking in Sydney yesterday, Credit Suisse director and chief investment officer Andrew McAuley said the strong Australian dollar and a stretched local share market mean global equities (particularly European markets) offer better value over the coming year.
“We are overweight Europe, overweight the [UK] FTSE and overweight the DAX [the German stock exchange],” Mr McAuley said.
“German companies in particular are gaining advantage from recovering emerging markets and from their main customers in developed markets.”
In its list of top 30 stock picks for 2014, Credit Suisse has included German companies Adidas, Allianz, Deutsche Bank and SAP.
The global financial services company is underweight fixed income for 2014 and does not see value in the bond market, said Mr McAuley.
“Yields will need to increase by about 100 basis points before the capital return aspect outweighs the income yield,” he said.
“We are not expecting yields to increase by that amount.”
While he stressed he is not downbeat over the local market, Mr McAuley admitted there is a lot more uncertainty as the economy transitions from mining capex to construction and manufacturing.
“Investors exposed to the Australian shares will find value in stocks that have a ‘self-help element’ and can add value ‘independent of the direction of the economy’,” Mr McAuley said.
Amcor, Brambles, CSL and Fox are “cash rich companies that can do buy-backs and M&A”, he said, adding that they also have a favourable position being exposed to Europe and the United States.
“ETFs [exchange traded funds] can add a great instrument or tool to access international markets,” Credit Suisse vice president of investment consulting Stephen Cabot said.
“It helps you get into a market quickly to get that broad exposure early on and then when we alter our views, if we want to up-weight or change the idea in a portfolio we will often suggest the exposure in an ETF.”
