insto - Australian financial markets

A focus on a company’s intangible features such as corporate governance, environmental and social responsibility is vital to uncovering its long term asset value. An over emphasis on short term factors that are able to be measured, rather than on longer term qualitative risk issues, contributed to the asset price bubble that preceded the global financial crisis. This according to a corporate governance report prepared by AMP Capital Investors presented at this year’s International Corporate Governance Network conference.

The latest update of the CommSec ‘Recession Warning Gauge’ shows that the Australian economy is still at risk. With economic recovery still new-born, policymakers must not get comfortable and withdraw stimulus too quickly, warned CommSec.

CommSec believes that the Government is right to be cautious about removing stimulus to the economy, adding that that the Reserve Bank needs to tread carefully in lifting rates to more normal levels.

The latest update of the CommSec Recession Warning Gauge shows that the Australian economy remains at risk. In February, the Warning Gauge correctly indicated “that the economy has softened but is not showing the sort of weakness associated with past recessions in Australia.”

Profit results have continued to surprise on the upside, with good results relative to expectations from companies such as Newcrest, James Hardie, OneSteel, United Group, Qantas, Woodside, Brambles, Downer EDI and QBE.

As Shane Oliver, head of investment strategy and chief economist AMP Capital Investors observes in a note to investors today: “So far we are about 60 per cent through the reporting season and 46 per cent of results have come in better than expected compared to only 11 per cent below. (See chart, following.) This is a big improvement on the last two reporting seasons when there were more companies surprising on the downside than the upside. In fact the net balance of positive less negative surprises of 35 per cent is the best it has been since the August reporting season 3 years ago.”

Chart: Profit results relative to market expectations 

Reporting season

Source: AMP Capital Investors

An AMP Capital fund has mandated HSBC to invest in inflation linked bonds. Sinopia, a quantitative fund manager of part of HSBC’s Global Investments business will manage global passive inflation linked bond exposure for AMP Capital’s FutureDirections Diversified Funds.

The purchase of Gemini Advisors Securities Investments by AMP Capital Investors is part of a strategy to take further advantage of opportunities in Asia-Pacific’s largest asset management market. AMP Capital Investors' main products distributed in Japan to retail investors are Australian bond funds and listed property funds.