A Bullish View On Australia
Benzinga | Apr 09, 2013 01:54PM ET
A day after one strategist issued a less-than-enthusiastic call on Australian stocks, new research indicates there are still some reasons to be bullish on equities down under.
What's Fueling The Inflow?
High interest rates relative to other developed market economies, a strong currency and an AAA sovereign credit rating are among the factors that have fueled inflows to Australian stocks, bonds and the country's dollar. Those factors may also be among the reasons that some market participants view Australian equities as richly valued, but those frothy valuations could be overstated.
Looking at historical valuations of Australian equities, we conclude that Australian equities are currently selling at relatively low valuations based on historical ranges, said WisdomTree research analyst Chris Gannatti in a new research note.
To The Contrary
That view stands to contrast to what iShares Global Chief Investment Strategist Russ Koesterich said in a note Monday when he downgraded his view on Australia to Underweight from Neutral.
Australia's sluggish growth outlook is problematic given that local equities are expensive compared to those of other developed market, said Koesterich. While most market watchers have been focused on the United States rally lately, Australia has actually done better over the last 12 months. Since March 2012, Australian equities have climbed roughly 16% in dollar terms, outpacing most developed markets, including the United States.
Indeed, Australia ETFs have been impressive performers over the past year. Heading into the start of trading Tuesday, the iShares MSCI Australia Index Fund (here .
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