Fidelity predicts strong year for equities

In a forward-looking markets outlook document, Fidelity portfolio manager Kate Howitt said consumer and export-driven companies will perform strongly.

“Fortunately, with our major trading partners in Asia still experiencing robust growth and the United States and Europe now looking more stable, the backdrop for our economic transition is benign,” she said.

“We are now seeing the usual transition mechanisms of lower interest rates and a weaker currency beginning to breathe life back into housing construction, domestic tourism, manufacturing and exports.”

Australia has a number of "structural advantages" that stand it in good stead, Ms Howitt said.

“[We have] robust population growth; a government with low debt levels; the attractiveness of our mineral endowment to our near neighbours; a tax regime that creates an incentive for company managers to be choosy in their capital investments, resulting in high-quality, high-returning businesses; and a stock market that offers a high level of after-tax income yield,” she said.

Australia’s attractiveness as a tourism, education and investment destination for the Asian middle class is set to bear fruit over the next few years, she added.

“This is nicely aligned with the Chinese government’s agenda to rebalance the Chinese economy away from fixed-asset investment towards consumption,” Ms Howitt said.

“Valuation levels in the Australian stock market remain moderate, and we continue to see a range of compelling investment opportunities among the ASX’s quality, high-returning businesses, especially those most exposed to the ongoing rise of the Asian consumer.”