The days when Australia “rode on the sheep’s back” may be long gone, but agriculture remains a critical component of the economy, generating valuable export income. While overseas investors understand its importance, for most local institutions it’s still a bridge too far.
For several years, investors, from institutional to retail, couldn’t get enough of the tech stocks with all their promises of future growth. But now the market has spoken and it’s saying precisely this – valuations matter again.
… as China bubbles along for the long term, too
Martin Currie has been investing in China for many years, with considerable success, from its home town of Edinburgh. In the past few years it has also been looking to set up shop there. That is easier said than done.
According to Willie Watt, Martin Currie’s chief executive, the funds management industry in China is still evolving, albeit quickly. He says that the retail part of the market is growing strongly but, in the past couple of years, so has the institutional market.
“They are starting to do things like international investors do in terms of quality fundamental research,” Watt says. “But the geopolitical backdrop, especially following the US election, is not that favourable.”
Martin Currie, which has had a joint-venture Shanghai-based China equities business in the past, has been discussing setting up a new investment team there for several years.
“We’re in no real rush,” Watt says. “Over the long term we believe that China will sort out its leverage issues and will transform itself from an industrial-age economy to a service economy. We have already seen it has the ability to develop world-beating service companies.”
He says that Martin Currie’s big pension fund clients are adopting a wait-and-see attitude to China.
“As their economy grows and has more liberalisation at the margin, it will be good for international investors. But I think it still tends to be driven by politics.”
Watt says he is very pleased with the way Martin Currie Australia has gone in the past couple of years, since the global firm was taken over by Legg Mason and then, in turn, took control of Legg Mason’s Australian equities operation.
“The performance has been really good and the team deserves to be successful in both the institutional and retail markets,” he says. “It’s not a flash in the pan… Our equity income strategy has done phenomenally well.”
