Australasia experienced less pain, can expect less gain as world recovers
by Peter Kerr
August 31 (BusinessDesk) – Australasian investors have experienced less pain during the global financial crisis compared
to their international counterparts, but can expect less gain as markets recover according to Russell Investments’ chief
investment strategist for Asia Pacific.
“We’ve had less downside, but we’ll have less upside compared to the rest of the world,” Andrew Pease said to a
Wellington investment conference. “There’s more relative investment potential outside our shores.” Pease said that
because Australia, in particular, had weathered the economic downturn better than most other countries, there is a
degree of optimism both sides of the Tasman compared to the extreme pessimism still observed in some other markets such
as America.
And, because both countries produce a range of commodities that have increased in price “in effect we received a pay
rise from the rest of the world,” he said. “The combined effect is that in complicated times, investors should keep it
simple,” Pease said.
This means maintaining a diversified investment portfolio, and not over-investing in New Zealand or Australia just
because both markets seem to be doing relatively well at the moment he said.
People should also observe that, according to the Commodities Research Bureau’s index, prices are only 10% below their
2007/2008 peaks.
The same people often think that China will continue with its unprecedented demand for commodities.
“But we’re picking the Chinese economy to slow, though it won’t crash and will bounce back again,” Pease said. “Don’t
forget too that over the past five or six years, there’s been a lot of investment in commodity production such as iron
ore and other base metals, there’s been a lot of expansion. While there’s commodity price optimism, there’s a risk in
the near term of disappointment because people have been neglecting the supply side and only looking at the demand
side.”
Senior Russell Investments consultant Joe Cheung told the same briefing that infrastructure assets and hedge funds are
bouncing back into favour. Worldwide, alternative investment types had fallen to just over 12% of total portfolio assets
in 2009, but this is expected to lift to almost 20% by 2012.
“A lot of people believe that alternative assets are uncorrelated to other major asset classes,” he said. “The theory is
that even if an equity market crashes, the investment value of alternative assets will not fall with the rest of the
market.”
Particularly strong are tolling operations, such as public-private infrastructure projects, where charges are
predetermined and, to a large degree, recession-proof.
(BusinessDesk) 15:35:34