Monday, July 24 2017
-despite mixed signals, overall economic outlook reasonably robust-
Global equity markets have reached an all-time high, but global growth is sustainable and company valuations are fair, according Australian equities manager DNR Capital.
Jamie Nicol, CIO at DNR Capital says: “We are optimistic about global growth prospects after reviewing key asset classes and market trends, such as the potential for expansion of the US manufacturing sector and Australia’s rising commodity prices.
He adds: “In assessing the outlook for the Australian market, we are thinking about three key reasons that impact the global growth outlook – the potential for inflation to raise its head, the pressures on the consumer in Australia and the political environment.
“Recent data continues to support the global growth outlook. US manufacturing data has been particularly strong with the Purchasing Managers Index (PMI) accelerating to 57.8 in June, which is at a three-year high and signals strong expansion.
“Likewise, we have seen continued economic improvement in Europe with the PMI at 57.4, the strongest since April 2011.”
Domestic equity markets continued to be a stand out in 2017 and the valuations are fair, according to Nicol, reflecting the “improving business conditions since December 2016, with the exception of retail and manufacturing.”
DNR Capital also identified Health Care as the strongest performing sector for the 2017 financial year, and Energy as the worst performer.
Nicol highlights some key performers in the Australian market “particularly testing services provider ALS Limited (ASX: ALQ), who experienced growth of 55 per cent for the financial year off the back of a pick-up in commodity prices and the announcement of the company’s intention to sell its loss-making oil business and make further acquisitions in the life sciences.”
Nicol says: “The domestic market provided a small return for the month of June with the S&P/ASX 200 Accumulation Index up 0.17%, but overall the 2017 financial year closed up strongly at 14.09%.”
“Banks continued to be under scrutiny, with South Australia announcing it would introduce its own state-based bank levy on the five major banks (including Macquarie), just six weeks after the Federal government announced a bank levy that aims to raise $6.2 billion. However APRA has provided certainty in terms of the level of capital required by the banks which reduces the risk on this investment.”
About DNR Capital
Founded in 2001, DNR Capital is an independent Australian investment management company that delivers client-focused, quality, investment solutions to institutions, advisers and individual investors. DNR Capital is a signatory to the Principles for Responsible Investment (PRI).
DNR Capital’s leadership in the Separately Managed Account (SMA) sector was reaffirmed by being named SMA of the year at the Money Management Fund of the Year Awards 2017 for its Australian Equities High Conviction SMA.
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IMPORTANT NOTE: The information relating to DNR Capital has been prepared by DNR Capital Pty Ltd, AFS Representative – 294844 of DNR AFSL Pty Ltd ABN 39 118 946 400, AFSL 301658. Whilst DNR Capital has used its best endeavours to ensure the information within this document is accurate it cannot be relied upon in any way and you must make your own enquiries concerning the accuracy of the information within. The information in this document has been prepared for general purposes and does not take into account your particular investment objectives, financial situation or needs, nor does it constitute investment advice. Before making any financial investment decisions you should obtain legal and taxation advice appropriate to your particular needs. DNR Capital will not be responsible or liable to anyone who acts or relies upon anything contained in, or omitted from, this document. Past performance is not indicative of future performance.