Rates outlook of major concern

CORPORATE earnings growth and the outlook for interest rates are the major concerns for future returns in the world’s money market says Fidelity Investments UK executive director of investments, Chrissy Keen.

Fidelity Investments is the world’s largest money manager, managing more than one trillion dollars.

Ms Keen explained Fidelity’s philosophies of investment to a throng of interested financial advisers in Perth recently.

The returns derived over the past year and for the first three months of this year provided for some interesting variations around the world.

The various markets around the world appear to be exhibiting some prospect of growth for corporations, except in nations such as Japan and parts of South East Asia.

When you look further at the differences between Europe and the US there are some very compelling reasons to look at the Eurozone as an avenue for your investment.

While the US and Europe share a number of similarities between their population sizes and their share of world GDP and trade, there is a marked difference in their shares of market capitalisation.

This has been firstly because of the steep increase in share prices on Wall Street over the past ten years and secondly due to the reliance by European companies on debt and family structures rather than equity offerings.

This staid and traditional structure is starting to change as European companies work their way into the 20th century.

This does mean that over the ensuing future years there will be a number of public offerings in European countries.

We are already starting to see some merger activity there, particularly in the banking sector, resulting in increased savings being generated for the shareholders of those banks.

All of this is creating a greater interest in the stockmarkets there. Potentially, this could see the Eurozone establishing a share of world capitalisation approaching that of the US.

Ms Keen was careful to point out that the basic principle for investors to stick to at this time is to look beyond the regional prospects and concentrate on the prospects for individual companies.

Even in regions with little or no growth prospects, there were still companies performing well. These were the companies Fidelity targeted in their investment frontier.

Fidelity’s investment expertise is available to Australian investors through its alliance with the Perpetual Funds Management group.