AUSTRALIA - Risk adversity being displayed by institutional investors is expected to cloud a decision by the Reserve Bank of Australia (RBA) on interest rates this week.
Speaking at a conference for institutional investors in Sydney, Dwyfor Evans, senior macro strategist at State Street Global Markets, said the firm’s cross border equity flows data suggest the world’s largest investors are displaying clear risk adverse tendencies.
Research from State Street shows institutional investors are reducing their international holdings of developed and emerging markets equities, along with higher yielding currencies such as Australian, New Zealand and Canadian dollars.
Evans said: “The broad data supporting an interest rate rise is strong, however, the RBA could realistically hold off for now given the implications for global markets.
”Our research shows further downside potential which will only add to the risk aversion behaviour by investors.”
Evans added the relative economic fundamentals between the US and Australia strongly favoured Australia, which would continue to drive the Australian dollar.
He said Australia would also continue to benefit from strong commodity prices and increasing correlation with neighbouring Asian countries, with a slowdown in China unlikely. “Global growth is no longer dependent on one engine – and this is particularly so for Australia,” said Evans.
“It is certainly not inconceivable that the Aussie dollar will move towards parity towards the end of 2007 or early 2008, especially since we seem on the cusp of a deep interest rate slide in the US.”
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers