Pimco grades Australia as top destination for investment
Pimco said Tuesday that Australia has solid economic fundamentals and is one of the top destinations for investment.
Just a month following Bill Gross, founder of Pimco, disclosed that the well known fixed income firm has started investing in equities, Pimco stated that developed countries' government bonds were headed for depression and a "new normal environment" would show fiscal markets behave in a different way compared to the last decades.
In spite of increasing fears from foreign investors about Australia regarding former PM Kevin Rudd's controversial mining tax and anxieties that China's economy is sluggish, Australia remains at the top of Pimco's prime destinations list.
David Fisher, global product management head based in the US, said that Australia, together with similarly mining-leader Canada, had the two major features that Pimco finds optimal - low debts upon entering the world fiscal crisis and strong flexibility in policy.
"Starting with a ladder, we would say those countries with solid fundamentals include in the developed world are places like Canada and Australia," remarked Mr. Fisher, summarizing Pimco's latest position for international financial markets.
"They're very well exposed to the growth dynamics in the emerging world and particularly through the channel of commodity prices.
"The countries that represent the most risk are those that had relatively weak initial conditions coming into the crisis and that lacked policy flexibility."
Mr. Fisher's remarks came as HSBC projects the emerging markets of Asia to continue growing as trade improves and as foreign investors, looking for higher profits, supplied capital into the area, amid weak development and profits in many developed nations.
"We favour emerging market assets," said Stephen King, chief economist of HSBC.
"Our currency strategists remain upbeat about emerging currencies, our equity strategists have recently upgraded their views on emerging equities while, in the fixed income space, we continue to believe that deleveraging will deliver remarkably low yields."
Dissimilar to Pimco, however, HSBC was more particular on Australian economic growth and rated the figures to "disappoint both this year and next", in spite of the country's astounding recent jobs creation.
HSBC's rating stands by the International Monetary Fund's report in the previous week, upping the growth forecast of Australia to increase by 3 per cent in 2010 to 3.5 per cent in the following year.