Investment Update Video’s

Investment Update Video’s

How to keep ahead of technology disruption in real estate

 
In Sydney on Valentine’s Day 700 bunches of flowers were delivered from an unused car park floor in the CBD.If you want to make money in real estate, you need to understand why this seemingly banal titbit of information is important.

Old asset classes are evolving into new asset classes – today’s car parks could be tomorrow’s logistics hubs. In fact, they might already be.

Every day we pick up newspapers and see a new entrant in the technology business that is changing the way we do things. Whether it’s taxis, hotels, or the way we consume food; technology disruption is changing the way we live.

Understanding where to be in the real-estate technology disruption era is important, particularly in a rising interest rate environment.

When I analysed what made many of the big technology firms such as Google, Uber and Airbnb successful, I was able to boil it to down to three key ingredients for success: They are customer driven (bottom up), they unlock unproductive gaps in their respective markets, and they force their competitors to adopt their approach, creating a new norm.

When you look at companies like Amazon, it realised moving goods efficiently meant it could create more value through the supply chain. The result has been billions of dollars in revenue for Amazon and many traditional retailers have failed.

As investors in commercial real estate, understanding technology disruption can have value-added benefits for assets. It helps us manage those assets more efficiently, and it helps us measure the use of those assets more effectively.

A good example of this is things like Beacon technology. The beacons use mobile devices to give people better connectivity to things around them, such as finding and paying for nearby carparks, reviewing and buying retail items, and tracking staff usage and timings at various locations in buildings.

As we move it into an environment where income growth is going to be critical, with the likelihood the Reserve Bank of Australia will raise rates early next year, we want to ensure we are maximising the efficiency of the assets we own.

Real estate is already grappling with the early stages of these changing conditions. A good example of this is the increasing demand for more flexible leasing arrangements in the office market.

The cost of not being an early adaptor to these technology changes will be high. Landlords are already surrendering retail margins of up to 150% by leasing their spaces to companies that embrace flexible, technology-enabled space use.

In the office sector, co-working or ‘third spaces’ are starting to take up large sections of the market. They provide customers with flexibility and community, enabling companies to scale quickly.

The industrial sector is starting to undergo massive changes too. I believe the growing need for last-mile logistics close to urban locations will inspire vertical warehouses. These warehouses will be designed to enable multiple transport forms such as vans, cars, and bikes to move goods to customers faster.

In the retail sector, tenancy mixes are transforming away from fashion and electronics towards ‘experiential’ offerings such as, food and beverage and cinemas. Social infrastructure such as childcare, medical and education services also becoming more common.

These evolutions will be driven by technological change that’s already occurring in the sector. That means that there is value to be captured.

As investors we need to ensure we are at the cutting edge of these changes to capture value through higher rental growth, and also higher asset value growth moving forward.

Luke Dixon – Head of Real Estate Research, AMP Capital

 

AMP Capital's Market Watch

 

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.


Original Source: Produced by AMP Capital Ltd and published on 11 April 2018.  Original article.

How to play duration in fixed income at this stage of the cycle

At a time when duration is front of mind among fixed income investors, many could be overstating the probability the asset class is heading for outright negative returns, says Simon Warner, AMP Capital’s Head of Fixed Income.

Late in the investment cycle, as Central Banks move to tighten interest rates and inflation looms on the horizon, there’s never been a more critical time for fixed income investors to be thinking about the duration they own, Warner notes.

However, some of the positives associated with holding duration as a defence to offset more aggressive parts of an investment portfolio could be getting lost amid concerns about the risks, Warner reckons.

There’s currently no pressure on the Reserve Bank of Australia to raise rates aggressively and there’s very little inflationary pressure here despite moves by the Federal Reserve in the United States to raise rates, Warner notes.

“Although the US Fed will be raising rates, the RBA will continue to lag,” Warner says during an interview with AMP Capital TV, highlighting that investors in the local fixed income market might be overstating the risks of holding duration.

Warner’s team will be presenting research at the upcoming Fixed Income Forum assessing the outcome of negative outright return in the Australian fixed income market to be quite low.

Indeed, a lot of people are worried about rising interest rates and what that means for the value of their bond portfolios, assuming that interest rates are about to spike and inflation is about to emerge and that it’s a really dangerous time to own duration in fixed income, Warner outlines.

“At this stage of the cycle, duration is a hot topic and it’s something we talk to consultants and customers about all the time,” Warner says.

Holding duration at the end of an investment cycle can defend against the more aggressive parts of your portfolio, a characteristic that is sometimes forgotten in the conversation about risk, he notes.

Through the cycles

Clearly, we’re well into the latter stages of the investment cycle, Warner explains.

Phase one of the cycle is the recovery phase, where interest rates are kept very low and there’s an acceleration in economic activity.

Second phase is where everything is pretty stable, where there’s no pressure on interest rates to go up because inflation hasn’t emerged and growth is very solid.

The latter phase is when there’s more pressure on interest rates to go up and investors need to be more mindful of when the cycle might eventually end, Warner outlines.

Credit has different appeal and displays different characteristics during each of these phases, Warner says.

In the first phase, when credit spreads are quite wide because in the aftermath of a recession there are more defaults, investors can expect to “ride credit spreads in”, getting reasonable capital gains from spread compression.

In the middle phase of the cycle credit spreads aren’t very high but they still compensate you for default; at this point in the cycle you’re going to get low defaults because the economy is very strong.

“In the latter phase of the cycle you want to be careful about which names you’re exposed to and how much aggregate credit risk you have because the backward looking default experience is not going to be a good reflection of what real default risk will be looking forward,” Warner says.

“It’s at this [latter] stage you need to be looking forward because you need to be thinking about the end of the cycle,” he adds.

AMP Capital Insights papers


Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.

Original Source: Produced by AMP Capital Ltd and published on 09 April 2018.  Original article.

 

What is a cryptocurrency and how does it work?

A cryptocurrency is a digital or virtual currency. Rather than existing in a physical form, like as coins and notes, it exists as a digital token1.

How does cryptocurrency work?

When you buy or receive cryptocurrency, you are given a digital key to the address of that currency. You can use this key to access, validate and approve transactions, as unlike a currency – which is regulated or controlled by a bank or government – cryptocurrency transactions are verified online by the people using it2.

Users verify every transaction, and the transactions are recorded on a digital public ledger called the blockchain. This prevents the same unit of the digital currency (or coin) from being spent twice by the same person3.

Cryptocurrencies are kept in a digital wallet and can be used to pay for actual goods and services. But because they’re not legal tender, they aren’t accepted everywhere. They’re most commonly used for online payments but can sometimes be used in stores, with the payment made using a mobile device4.


AMP Capital chief economist and head of investment strategy Shane Oliver explains in simple terms what a cryptocurrency actual is. Watch now and learn more with AMP.

How many cryptocurrencies are there?

The most well-known cryptocurrency is Bitcoin, but there are hundreds of different types. Some of the other well-known ones include Ethereum, Litecoin and Ripple.

How’s a cryptocurrency valued?

“The big debate around cryptocurrencies is how to value them. On the one hand, you could argue that it’s a revolution in the making and that this will be the way of all currencies in the future and, therefore, the sky’s the limit in terms of the price,” Shane says. “The counter argument is that it’s very hard to value an individual cryptocurrency like Bitcoin. It doesn’t spit out income or dividends, so it makes it very hard to value.”

Bitcoin reached a record high of almost $US 20,000 per coin in December 2017, but it’s value has since halved. Like other currencies, the value of a cryptocurrency is ultimately determined by supply and demand – or how much investors are willing to buy it and sell it for.

What are the risks and benefits associated with cryptocurrency?

Benefits

Shane says that, on the plus side, cryptocurrencies are a good medium of exchange and way of transacting money around the world very cheaply, bypassing the banks and doing so with very low transaction fees.

Risks

Aside from the risks associated with the fluctuating value of cryptocurrencies, there are also risks associated with the online nature of cryptocurrencies, such as the online platforms where they are bought and sold, or your digital wallet, being hacked. And due to their anonymous nature and the inability of governments to freeze funds, cryptocurrencies are also popular among criminals5.

For more information

As with any financial decision, it’s worth doing your research and ensuring you fully understand the risks involved before investing in any financial products.

For more information on investments, speak to your financial adviser or you can callus on 03 6343 1007.

1 ASIC Moneysmart, Cryptocurrencies.
2,3 Finder, What is cryptocurrency – and how can I use it?
4,5 ASIC Moneysmart, Cryptocurrencies.

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.

Original Source: Produced by AMP Capital Ltd and published on AMP.com.au 09 April 2018.  Original article.

 

There’s been a ‘changing of the guard’ among sustainable dividend earners

There’s been a ‘changing of the guard’ among sustainable dividend earners

Dividend lovers: we’re witnessing a bit of a changing of the guard when it comes to the performance of ASX listed companies.

Financials and in particular banks – where investors have traditionally looked for their sustainable dividend growth – are beginning to be threatened for the mantle of sustainable dividend earners by so-called cyclical stocks, according to Dermot Ryan, AMP Capital’s Australian Equities Income Fund Co-Portfolio Manager.

Within the cyclical category, resources stocks are beginning to show signs of dividend growth, while financials’ dividend growth is beginning to look static, Ryan points out.

“There has been a changing of the guard,” Ryan says during this recent interview with AMP Capital TV following the recent earnings season.

Ryan highlights this has been the best reporting seasons since 2010 when measured by the ratio of positive earnings revisions to negative earnings revisions.

The local share market also saw strong dividend growth of 3.5 per cent over the prior results in 2017.

However, what’s a little different is that distribution growth is coming from a different part of the market, Ryan adds.

“Previously, financials have been leading dividend growth. Financials are now holding their dividends and we’re seeing a number of cyclical sectors, namely energy and resources, increasing their dividends,” he says.



The following chart compares dividend yield growth of financials and resources segments on the ASX and shows the dividend yield of the resources basket creeping up, reflecting dividend growth coming through in this segment.



This trend is stronger than perhaps the above chart suggests, considering bank shares have risen steadily as their dividends have grown in recent years, Ryan points out.

Shares in resources companies have been rising in recent months as investors begin to focus on names within this segment but the dividend growth within this segment is still apparent, Ryan continues

Looking at share price and dividend growth of resources companies side by side (chart below) it’s clear dividend growth in this segment is going up in unison with valuations.



Overall, the most recent earnings season was a bit of a pivotal time for investors, Ryan reckons.

Coming to the end of a multi-year bull market, valuations are at multi year highs and we now are now about to start seeing interest rates tighten overseas.

Higher interest rates coming down the pipe could mean higher costs of funding, which could begin to challenge business models. At the same time, we are starting to see signs of economic growth, which could be a positive other businesses positioned to take advantage of emerging growth opportunities.

“At the moment the market really likes growth stocks, but in that space we’ve seen growth stocks as expensive as they’ve been for over a decade. If you are expensive you’ve got to deliver and that was something we saw this earnings season,” he says.

Investors seeking income producing stocks should be looking for sustainable dividend producers – Ryan highlights the characteristics of a sustainable dividend producing share in this recent article.


AMP Capital Insights papers


Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.

Original Source: Produced by AMP Capital Ltd and published on 26 March 2018.  Original article.

A slip in house prices is no reason to panic

A slip in house prices is no reason to panic

The current slide in Sydney and Melbourne residential property prices will fall far short of a housing bust, according to AMP Capital Head of Investment Strategy and Chief Economist, Shane Oliver.

House prices in Sydney have fallen about 5 per cent this year from last year’s peak, and eased slightly in Melbourne according to Oliver, who adds that both markets may have further softness ahead.

“I think it has a bit further to go, but in the absence of much higher interest rates or much higher unemployment – both of which are unlikely – we shouldn’t see a property crash,” Oliver predicts.

Over the past five years, Australia’s two biggest property markets, Sydney and Melbourne saw price surges of 75 per cent and 59 per cent respectively.

Time then, for a market correction, Oliver tells AMP Capital TV.

Housing is Australia’s largest asset class, worth some $6.8 trillion according to Australian Bureau of Statistics data. The loans accompanying these assets were valued at about $1.7 trillion in 2017.

If property prices did end up in a downward spiral it could cause problems for banks, Oliver warns.

“Some people might default on their loans and the banks have to sell their houses and then find they are not worth as much as their underlying mortgages. So there are issues and threats to the broader economy,” says Oliver, but he stressed that he did not see this on the horizon.

“It’s worth putting it in some perspective,” he says. “The adjustment we are seeing in house prices is quite normal. It follows a very strong period in Sydney and Melbourne.”

In fact, most other capital cities are already seeing, or should soon see property price improvements.

“Other cities in Australia aren’t anywhere near at the same risk,” says Oliver.

“We are seeing very strong growth in Hobart and moderate growth in the other capital cities, Canberra, Brisbane and Adelaide, so the falls we are seeing are going to be concentrated in Sydney and Melbourne, but the broader picture is far less negative.”

Even Perth and Darwin, which suffered during the decline in mining investments look to be bottoming out.

Instead of being a cause for concern, Oliver believes that the easing in property price gives more room for the Reserve Bank of Australia to keep rates on hold, rather than needing to use them to cap house prices.

“It gives the RBA more flexibility in what they need to do on interest rates,” he says. “If they want to keep rates lower for longer because of softness in the broader economy, they can now do that. It’s good from that point of view.”


AMP Capital Insights papers

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.

Original Source: Produced by AMP Capital Ltd and published on 13 March 2018.  Original article.


 

Where’s all the share market volatility coming from?

Where’s all the share market volatility coming from?

There is quite a lot of talk about volatility coming back to share markets all of a sudden, and with the talk there’s also bit of conjecture about where the volatility originates from.

Some say it’s because interest rates and bond yields are beginning to rise; others will point to the end of quantitative easing in the United States and elsewhere for the bumpier ride.

The return of inflation has been mentioned quite a lot recently as a reason why share markets are jumpy all of a sudden, by what has the return of inflation in the United States really got to do with share market volatility?

The link between share market volatility and inflation has to do with the recalibration investors are making to their expectation of share market performance, according to Dr Shane Oliver, AMP Capital’s Chief Economist.

The reason we have the volatility is simple, Oliver says:

“Investors have been used to low volatility for so long, low inflation, low interest rates low bond yields and that was factored into many investment markets share markets. Now we are moving into a world of possibly higher inflation, higher interest rates, investors have to reprice and adjust their expectations,” Oliver explains in this interview with AMP Capital TV.

Further, there’s a bit of a battle of the “bulls and the bears” taking place at the moment, Oliver adds, pointing out that some market watchers and investors see an uptick in inflation in the United States as a good thing, while other investors are focusing on the negative impact of the transition that’s taking place at the moment.

“If interest rates go up, bond yields go up, that makes share markets a little less attractive compared to bonds and cash at the margin, and investors need to make that adjustment,” Oliver notes, explaining the rational for the dips we’ve seen in markets this year.

Share markets dropped over two consecutive days locally in early February, led by even steeper falls over seas, before recovering their losses towards the end of the month.

Meanwhile, there’s a silver lining for the more optimistic share markets watchers, Oliver adds.

From higher inflation and higher interest rates, you’re also getting potentially higher profits growth, he says.

“An uptick in inflation is not a bad thing, but investors have to adjust their expectations and that’s what’s causing the volatility,” he says.

AMP Capital Insights papers

 

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.

Original Source: Produced by AMP Capital Ltd and published on 12 March 2018.  Original article. 

Industrials: top pick for real estate sector this year

Industrials: top pick for real estate sector this year

The sudden market realisation that US borrowing costs are likely to rise significantly this year will drive demand for real estate investments that offer income growth, according to AMP Capital Head of Real Estate Research Luke Dixon.The US stock market endured its biggest plunge in six years earlier this week, triggering ongoing volatility across the globe, as investors started to factor in the chance of three or more US Federal Reserve rate hikes this year.

The Fed raised rates three times last year and AMP Capital predicts it could raise rates as many as five times this year.

“These global factors will have a significant impact on real estate markets in Australia,” says Dixon. “Investors are going to be really focused on lifting the productivity and income performance of their assets as capital values slow in the face of higher capital costs.”

One sector where growth in demand is likely to outpace cost of capital increases is industrial, which will benefit from a structural shift towards online retail spending.

“Our view is that in Australia the industrial sector is best placed to take advantage of the global and structural changes occurring in our economy,” says Dixon. “It has capacity for higher income growth moving forward, higher liquidity of stock and lower total entry costs relative to other asset classes such as office and retail.”


Ecommerce giant Amazon launched in Australia late last year and, along with local rivals, is expected to lift fulfillment capabilities to deliver better, faster delivery options.

“The industrial sector has a particularly strong narrative around ecommerce growth going forward,” Dixon says. “Our view is that the arrival of Amazon in Australia will be a strong catalyst for industrial space demand. We are forecasting over 500,000sqm of gross take up from ecommerce providers over the next five years.”

“That is going to lead to an upswing in demand for industrial nationally, particularly in markets like Sydney and Melbourne that have high population density and high population growth,” says Dixon. “They will benefit from rental growth based off this demand.”

Technology-related manufacturing will be another growth spot in the industrial sector, he predicts.

“We believe areas such as solar panel manufacturers and specialised technology manufacturers are going to be growth sectors that will propel rents higher than the long-term average of four per cent across most major industrial markets,” Dixon says.

Whilst capital costs will increase, income levels are lifting as the Australian economy enters its 27th year of continuous economic growth. The broadening of this growth as Queensland enters a more sustained economic recovery, points to sustained demand momentum for all commercial asset classes in 2018.
Even before this week’s equity market turmoil, interest rates in the US, Canada and UK had already lifted bond rates, and global growth projects to a record high of 3.8% according to the IMF in 2018.

This indicates that we are in the early stages of a global transition from the ‘lower for longer’ theme of the past five years, to a higher cost of capital environment moving forward.

It’s not all good news in the property sector though. The very forces that are helping drive demand in the industrial space for logistics centres, is likely to put pressure on many customer-facing retail stores.

“There are some headwinds,” says Dixon. Ecommerce will undoubtedly deliver benefits for industrial  demand, however the structural shift towards online will negatively impact sales growth in the retail sector going forward.”

To adapt to the escalating rise of online retail, he predicts good shopping centre owners will be investing heavily in upgrading spaces to include more interactive experiences such as dining and entertainment, in order to generate income growth.

“As we move into a higher cost-of-funding environment, investors will be targeting assets best placed to produce strong income growth through the cycle.” Dixon says. “That means attracting the best tenants in the fastest growing markets to guarantee that income during potentially a weaker economic growth period.”

AMP Capital expects the Reserve Bank to raise the official cash rate from the record low of 1.5 per cent in late 2018 or early 2019. Increased borrowing costs tend to lead to a depreciation in real estate values, however this has been a lowly geared real estate cycle relative to past cycles, which points to pricing deterioration being minimal, and dependent upon the severity and number of future rate increases.

 

AMP Capital's Market Watch

 

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd 

 

‘Volatility comes is clusters’: Dermot Ryan

‘Volatility comes is clusters’: Dermot Ryan

Investors glued to their share portfolio screens recently following the abrupt share market selloff should expect to experience more of the same in the months ahead, according to Dermot Ryan, AMP Capital Income Equity Fund Co-Portfolio Manager.While more volatility can mean higher levels of anxiety for some investors, it can also bring opportunities to those able to stay calm during these periods, Ryan adds.

“Volatility, where we haven’t seen a lot in a while, is normally a sign the market regime is shifting somewhat and they rarely come singularly and they often come in clusters. We expect we’ll see further contained outbreaks of volatility” he tells AMP Capital TV .



The share market rout, which resulted in a 4.6 per cent drop in the value of the ASX200 over two days, followed the United States share market, which had its worst and most volatile day since 2015.

“We saw broad based selling… I saw almost every name in red,” Ryan describes.

Ryan likens the volatility during the last week to other periods of stimulus changes such as the “taper tantrum” in 2013, which he notes was also proven to be a buying opportunity for quality assets for patient investors.
He emphasises the fundamental analysis points to a strong outlook for economic growth both globally and domestically.

While the sell off in the Australian share market was broad based, it was concentrated in listed companies, which have rallied the most in recent months – Ryan points out – including some of the smaller resource companies as well as asset management firms.
In terms of buying opportunities, Ryan singles out the real estate investment trusts segment.

“Global growth has been running hot and some in the market have forgotten that this has been facilitated by large amounts of monetary stimulus, which needs to be slowly withdrawn now that sustained economic growth has been achieved,” Ryan explains.

“The removal of stimulus in a measured way is a perfectly reasonably proposition although it has yet again caught the unprepared by surprise. Given rates are going to rise in the Atlantic economies over the coming months we may see further jitters,” he says.


AMP Capital's Market Watch

 

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd 

 

What if interest rates rise faster than expected?

What if interest rates rise faster than expected?


The US Federal Reserve may raise interest rates twice as often as the market expects in 2018, according to AMP Capital Head of Investment Strategy and Chief Economist Shane Oliver.

“This year we think the Fed is going to raise rates more than the market is allowing for,” says Oliver. “Market expectations are factoring about two and a half hikes and we actually think they will do four or possibly five hikes this year.”

The Fed raised rates three times in 2017 in response to promising growth signals and falling unemployment. At its last rate hike in December, the Fed raised its forecast for economic growth in 2018 and projected three hikes for the year; however, it omitted previous language about the labour market further strengthening.

This omission, coupled with surprisingly weak inflation readings, have kept a cap on overall market expectations.

Oliver predicts this will change as the year progresses, which in turn will see rates move above their still lower-than-normal levels.



“The US economy seems to have a good head of steam up. There is very low unemployment and declining levels of spare capacity in the US so we think we will start to see inflation in the US head higher,” says Oliver. “That will allow the Fed to speed up the pace of normalising interest rates.”

There will be three major ramifications of this, says Oliver.

“I would be a little bit wary of investing too much in long-term government bonds,” he warns. “Interest rates over the long term will rise, pushing up bond yields.”

He also cautions against industries that usually operate with high levels of debt.

“It means interest rate-sensitive parts of the market will be under a little bit of pressure. I’m thinking here about listed infrastructure, listed real estate and so on. Those parts of the market that have benefited from low interest rates might start to struggle a little bit.”

The other main repercussion will be increased pressure on equity markets.

“There is going to be more volatility this year in response to a more aggressive Fed,” says Oliver. “But I don’t think it’s going to cause a bear market in shares because even though they will go up in the US, other parts of the world will see relatively low rates.”

The Fed elected to leave rates unchanged at its January board meeting. The meeting was the last for Chair Janet Yellen, who took over the job in four years ago when the quantitative easing policies post the financial crisis were in full swing. She was responsible for ending these policies as the US economy picked up, and raising interest rates in 2015 for the first time in seven years.

She is being replaced by US President Donald Trump’s chosen successor, Jerome Powell.

AMP Capital's Market Watch

 

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd 

What the rise of the $A means for global investors

What the rise of the $A means for global investors

The recent rise of the Australian dollar has been surprising but not confounding for experts who believe the its natural level is closer to US70 cents.

Indeed, it’s the weakness of the US dollar that’s pushed the Australian dollar higher relative to the benchmark currency in recent weeks even though US economic growth and a resurgent commodities segment had most market watchers expecting the Australian dollar to be trading lower.

Since mid December last year, the Australian dollar has been on a strong run relative to the USD, rising around 7.5 per cent and pushing above US80 cents.

“I think [the Australian dollar rise] is limited because the longer it goes up, the more it will constrain the economy and the longer the Reserve bank will hold off raising rates,” Dr Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist, tells AMP Capital TV.



Investors allocating to global equities expecting a free kick from a down-trending Australian dollar this year might be wondering whether it is likely to stay high or even whether it could continue to defy gravity and strengthen against the US dollar further.

A survey of self-managed superannuation funds by SMSF administrator Super Concepts shows funds increased their exposure to international shares during the last quarter of last year above and beyond what performance and currency movements would have delivered. SMSFs increased their exposure to international equities from 13.1 per cent to 13.9 per cent during the quarter based on allocation changes of around 2650 funds.

Oliver’s view is the natural level of the Australian dollar is closer to 70 cents given central bank policy settings and economic growth that’s begun to emerge in the US. The International Monetary Fund recently raised its US growth forecast to 2.7 percent this year, 0.4 point higher than the forecast in October.

For those investors allocating to global shares, Oliver suggests maintaining a bias to global shares is still worthwhile.

“While the Australian dollar has gone up, my feeling is you still would have been better off having your money in global shares because they have substantially outperformed the Australian share market even with the currency movement taken into account,” Oliver notes.

AMP Capital's Market Watch

 

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd 

What high household debt means for investors

What high household debt means for investors

“High house-hold debt is Australia’s Achilles heel,” says AMP Capital Head of Investment Strategy and Economics and Chief Economist, Shane Oliver. “I’ve been thinking this for many years now and yet it seems to keep going higher.”

Latest data from the Australian Bureau of Statistics puts total household liabilities at $2.466 trillion, or 199.7 percent of disposable income, putting it among the highest in the world.

Australians have been borrowing money to keep apace of record high property prices in markets such as Sydney, which has enjoyed several years of double-digit percent price gains, and Melbourne.

“We’ve seen roughly a four-fold increase in the value of household debt relative to income over the past 30 years,” says Oliver. “That obviously leaves Australian households vulnerable if interest rates rise or unemployment goes up.”



While AMP Capital does expect the Reserve Bank of Australia to raise rates from their historic lows later this year, Oliver does not believe it will be enough to cause already easing property prices in Sydney and Melbourne to slump.

“I don’t see the Reserve Bank jacking interest rates up dramatically – I don’t see them doing that. The Reserve Bank knows household debt is high.”

The markets are predicting the RBA will raise the official cash rate off the record low 1.5 per cent level in late 2018. AMP Capital doesn’t believe this will happen before November.

“The bottom-line is in the absence of much higher interest rates or much higher unemployment – both of which seem unlikely, it’s hard to see a crash in the Australian property market, but it’s certainly an issue worth keeping an eye on, given the high level of household debt,” Oliver says.

If households did have trouble servicing debts, they could be forced to sell their homes, causing price declines of 20 percent or more, but Oliver stresses that he does not see this as a likelihood in the absence of much higher rates or unemployment.

Adding to his argument is the prospect that unemployment will fall rather that rise significantly.

“It’s still too high, but I think over time as the global economy tends to improve, I think unemployment will go down rather than up.”

Australia’s unemployment rate rose to 5.5 per cent in December, from 5.4 per cent in November according to the Australian Bureau of Statistics, however on a positive note, the data also revealed employment rose every month in the 2017 calendar year, for the first time in at least forty years.

 

AMP Capital's Market Watch

 

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd 

What’s in Store for Interest Rates, Housing Market and Australian & Global Economies in 2018?

31st January 2018







AMP Capital's Market Watch

 

 

Important note: While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2018 AMP Capital Investors Limited. All rights reserved.  


Original Source AMP YouTube 

What a banking Royal Commission means for investors and superannuants

What a banking Royal Commission means for investors and superannuants

A dip in the value of listed financial stocks including Australia’s Big Four banks the day the federal government announced a Royal Commission into the banking, superannuation and financial services industry, could be a sign of things to come for shareholders in the country’s most widely held institutions.

The long heralded Royal Commission into the banking industry could have the effect of a “cloud of doubt” hanging over banks and financial for the next 12 months or so, says Dr Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist.

“We don’t know which way it’s going to go – it may come to something more significant or it may lead to a lot more regulations. There’s a degree of uncertainty around this part of the market,” Oliver says in his latest video commentary.



But a potential overhang stemming from the Royal Commission is not just something for holders of bank shares to worry about and has the potential to impact all Australians, Oliver notes.

Banks and related financials account for almost a third of the value of the local share market, which accounts for some 8 per cent of each individuals’ superannuation exposure, Oliver highlights.

Royal Commission or not, bank shares will continue to offer attractive yield relative to the broader market and therefore will remain in demand amongst retirees seeking income via the share market, Oliver points out.

From a global perspective, though, Oliver says banks globally have some more appealing characteristics when it comes to potential share market returns, in particular, when it comes to valuation.

“Recently, out of the US, we’ve heard there could be less regulation with US banks. So the US is moving in the direction of deregulation at a time we’re moving in the direction of increased regulation potentially,” Oliver points out.

I

AMP Capital's Market Watch

 


Dr Shane Oliver About the AuthorDr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

 

Important note:While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2017 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd 

How the yield trade is shaping our view of the world

How the yield trade is shaping our view of the world

The so called yield trade – which has pushed investors out along the risk curve into more risky assets seeking income – has trained individuals to think more critically about their assets they include in their investment portfolios, reckons Dr Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist.

Since central banks have dropped interest rates to record low levels – in some cases to zero and even negative – it’s forced investors to find income in investments without traditional capital protection bonds have offered in the past.

The lower risk free rate resultingin a move out along the risk curve has been a learning experience for many investors, Oliver believes.

“In a sense we’ve become a bit more fundamentally focused. We’re focused on the cash flow, the dividend, interest rates and so on, which is different from what we saw prior to the yield trade becoming an emphasis. It’s changed the way we invest in things. We’re more focused on income and you’d have to say that’s a pretty good thing,” Oliver comments.



The so called “yield play” has been going on since the world has moved from very high inflation and high interest rates in the early 1990s, to the low inflation and low interest rates we have today, Oliver highlights.

The risk underlying the yield trade is when it gets “pushed to extreme”, potentially leaving investors stranded in places they may not have previously explored, Oliver notes.

“Yields will get pushed down as investors are making investment decisions mainly focused on the income. The danger is at some point inflation starts to creep up, interest rates start to rise, and then those yields will have to move higher again, which will then reduce the value of the underlying investments when that happens,” Oliver explains.

“When this will happen and how quickly it will happen is anyone’s guess. We think there will be some uptick in inflation as we go through next year, so that’s certainly worth keeping an eye on, to see how aggressive the Fed is at raising rates,” Oliver notes.


AMP Capital's Market Watch

 


Dr Shane Oliver About the AuthorDr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

 

Important note:While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2017 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd 

 

Volatility could present buying opportunities in 2018

Volatility could present buying opportunities in 2018

Volatility and the first meaningful lift in inflation coming from the United States will likely be the main differentiating features in global financial markets in 2018 compared to this year, according to Dr Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist.

The dips in share markets experts anticipated in 2017 are more likely to materialise in the new year, Oliver notes.

But with global growth continuing – as emerging market economies begin to join the United States in its growth recovery – these dips could present reasonable buying opportunities for savvy investors, Oliver says.

“The big thing in 2018 will be volatility. Twenty seventeen was a pretty smooth year; 2018 is likely to see a pickup in volatility. Investors should be looking out for corrections as a buying opportunities,” he says




Another big theme in 2018 will be the divergence between US monetary policy and the actions of central banks in Australia and in other countries around the world, Oliver points out.

The US Federal Reserve is likely to hike four times in 2018 and will to continue with quantitative tightening while other central banks including the Reserve Bank of Australia are likely to lag, Oliver points out.

Investment returns across most asset classes were superior in 2017 compared to the previous year, Oliver notes. He points out investors should modify their expectations for returns in the year ahead in 2018.





It’s possible political risks may have more impact in 2018 after a relatively benign 2017, Oliver notes.

US political risk is likely to become more of a focus again with the ‘Mueller inquiry’ continuing and the November mid-term elections playing out, which is likely to see the Republicans cede power in the House of Representatives to the Democrats. This may result the possibility President Trump could resort to populist policies like protectionism to shore up his support, Oliver predicts.

Meanwhile, the Italian election is likely to see the “anti-Euro” movement do well; North Korean risks continue to remain unresolved; and there is also a risk of an early election in Australia, he points out.

“Fortunately, there is still no clear sign of the sort of excesses that drive recessions and deep bear markets in shares; there has been no major global bubble in real estate or business investment; there is the bitcoin mania but not enough people are exposed to that to make it economically significant globally; inflation is unlikely to rise so far that it causes a major problem; share markets are not unambiguously overvalued and global monetary conditions are easy,” Oliver explains.

“So arguably the ‘sweet spot’ remains in place, but it may start to become a bit messier,” he says.



AMP Capital's Market Watch

 


Dr Shane Oliver About the AuthorDr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

 

Important note:While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2017 AMP Capital Investors Limited. All rights reserved.

Original Source AMP Capital Ltd 

 

What a banking Royal Commission means for investors and superannuants

What a banking Royal Commission means for investors and superannuants

A dip in the value of listed financial stocks including Australia’s Big Four banks the day the federal government announced a Royal Commission into the banking, superannuation and financial services industry, could be a sign of things to come for shareholders in the country’s most widely held institutions.

The long heralded Royal Commission into the banking industry could have the effect of a “cloud of doubt” hanging over banks and financial for the next 12 months or so, says Dr Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist.

“We don’t know which way it’s going to go – it may come to something more significant or it may lead to a lot more regulations. There’s a degree of uncertainty around this part of the market,” Oliver says in his latest video commentary.



But a potential overhang stemming from the Royal Commission is not just something for holders of bank shares to worry about and has the potential to impact all Australians, Oliver notes.

Banks and related financials account for almost a third of the value of the local share market, which accounts for some 8 per cent of each individuals’ superannuation exposure, Oliver highlights.

Royal Commission or not, bank shares will continue to offer attractive yield relative to the broader market and therefore will remain in demand amongst retirees seeking income via the share market, Oliver points out.

From a global perspective, though, Oliver says banks globally have some more appealing characteristics when it comes to potential share market returns, in particular, when it comes to valuation.

“Recently, out of the US, we’ve heard there could be less regulation with US banks. So the US is moving in the direction of deregulation at a time we’re moving in the direction of increased regulation potentially,” Oliver points out.


AMP Capital's Market Watch

 


Dr Shane Oliver About the AuthorDr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

 

Important note:While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2017 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd  

All aboard the Bitcoin bandwagon

All aboard the Bitcoin bandwagon

As global financial regulators and market exchanges discuss the potential for investors to trade Bitcoin in new ways, including via a futures market, investment experts continue to caution people curious about getting exposure to the meteoric rise of the crypto currency.

“To me, bitcoin has all the classic hallmarks of a bubble. It started off with some fundamental development, which is favourable, potentially revolutionising the payment system slashing the price of shipping money from around the world,” notes Dr Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist.

“But as the price goes higher and higher, investors are buying into it not because of the development but because it’s gone up… so it’s become very much a speculative bandwagon,” Oliver comments, in his latest video commentary.



Amid the hype, which has led to astronomical returns for speculative traders as well as true believers in the future of the underlying Blockchain technology and the role of crypto currency, banks and financial institutions are now finding new ways to get in on the action.

Exchange traded funds dedicated to crypto currencies are the are the next obvious step. A futures market for Bitcoin will enable investors to trade derivatives rather than having exposure to the asset itself… “if you can call it an asset,” Oliver comments.

No doubt there will be increasing ways to invest in crypto currencies and bitcoin in the future, Oliver remarks.



Oliver draws on the work of Nobel Economics Laureates Daniel Kahneman, Robert Shiller and Richard Thaler in his recent note to describe the Bitcoin phenomenon in the context of asset price bubbles and crowd psychology.

Dr Shane Oliver About the Author Dr Shane Oliver, Head of Investment Strategy and Economics and Chief Economist at AMP Capital is responsible for AMP Capital’s diversified investment funds. He also provides economic forecasts and analysis of key variables and issues affecting, or likely to affect, all asset markets.

 

Important note:While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) make no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This document is solely for the use of the party to whom it is provided. © Copyright 2017 AMP Capital Investors Limited. All rights reserved.


Original Source AMP Capital Ltd 


Beware China’s shift to financial reform

Beware China’s shift to financial reform

It’s likely China will turn its focus towards slowing down its accumulation of debt, a decision that could have real implications for the Australian economy, Dr Shane Oliver, AMP Capital’s Head of Investment Strategy and Chief Economist, reckons.

One of the key takeaways from October’s 19th National Congress of the Communist Party of China was the enhanced power and authority of the country’s President, Xi Jinping, Oliver points out.



With this enhanced power and authority comes the potential for China to refocus its attention on economic reform; making its economy more efficient with a particular focus on financial reform, Oliver notes.A renewed focus on financial reform means potentially slowing down the country’s mounting debt load, he says.

“In the past we’ve seen times when the Chinese have gone through a phase to regulate the economy to slow down the rate of growth of debt, then of course they put the accelerator back on when the economy slows too much. You could see a continuation of the economy running hot and cold,” Oliver highlights.

China’s economic engine has always been a major factor in Australia’s economic prospects, a relationship that’s set to continue. Although Oliver notes the nature of China’s influence here will continue to morph.

The focus of the Chinese economy is shifting increasingly to services such as renewables, electric cars; also the growth in middle income earners which encapsulates the ongoing demand for Australian tourist services and education, Oliver points out.

Relying on the performance of areas more prevalent during China’s fixed asset boom might be less certain than in the past, Oliver points out.

“Investors need to look beyond just exposure to iron ore and coal to get exposure to the China story in the future,” he says.

Original Source AMP Capital

PPPs are back and better than before

The image of public-to-private partnerships (PPPs) in relation to infrastructure took a hit a few years ago, but now they are back, and are much better for investors than before.

That’s the view of AMP Capital Head of Investment Strategy and Chief Economist Shane Oliver, who said that in the years leading up to the 2008 financial crisis, investor syndicates often had to over bid for infrastructure opportunities to get access to them, making it difficult in some cases to cover the costs and make the assets profitable once completed.

“The model has improved substantially,” says Oliver. “It’s less focused on encouraging the private partners to excessively bid up the price for the underlying asset and we’ve ended up with a more sustainable model.”

 

 

Published on Aug 7, 2017   YouTube.com

Aug.08 — Nader Naeimi, head of dynamic markets at AMP Capital, explains why the Federal Reserve may surprise markets with rate hikes. He speaks with Bloomberg’s Sherry Ahn on “Bloomberg Markets: Middle East.”

 


 

AMP Financial Experts – Benefits of active management


 

AMP Financial Experts – Investing in uncertain times