Innes McKeand, head of equities at AustralianSuper, is equivocal about the market’s latest surge and its 18 per cent gain over 12 months.
One has to be “cautious,” he says, but “that’s not to say the market won’t progress further.”
Still, AustralianSuper has trimmed its holding of Australian stocks to where it now comprises 30 per cent, or $13.5 billion, of a $45 billion portfolio of investments.
McKeand says the market’s most recent gains are due to earnings forecasts stabilising or improving. For further gains there needs to be evidence that companies can deliver on these earnings expectations, he says. ANZ’s first-half net profit of $2.9 billion was perhaps the evidence the market needs given that the bank’s chief executive Mike Smith seemed ‘optimistic’ about the company’s future business, says McKeand.
ANZ, he says, along with its three biggest rivals and Telstra are continuing to attract investors because their yields are about 5 per cent. Telstra is yielding about 8 per cent, according to McKeand. That’s very favorable dividend yields compared with bonds and deposit rates, he says.
McKeand says mining stocks such as BHP and Rio Tinto are “conspicuously cheap”. Their productivity improvements have yet to be reflected in their share prices, he says.