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.”
The registration deadline for the Workplace Savings & Benefits Awards 2019 is today.
This week's top stories were the DWP giving the green light to CDC and TPR granting extensions for 11 master trust authorisation applications.
Susan Martin says building strong foundations for business are the only way forward as the pensions industry is radically shaken up
The Pensions Regulator (TPR) has granted Now Pensions a six-week extension for its master trust authorisation application after the 31 March deadline, PP can reveal.