Tech to hold rates back

Stockmarket to keep rising as a result, says Hostplus expert

THE tsunami of digital disruption washing around the globe is creating a relentless undertow for inflation, according to one of Australia’s most successful investment experts.

And interest rates will stay anchored at anaemic levels as a result, he says, meaning investors are likely to keep flocking to the sharemarket in their desperate search for a return.

Sam Sicilia, chief investment officer at Hostplus – one of Australia’s most successful superannuation funds – expects global stockmarkets to continue rising, notwithstanding volatility caused by “adverse world events”.

His comments come as Australia’s benchmark share index climbs further above 6000 points, chalking up a third-straight day of gains to hit a fresh decade-long high.

The ASX 200 climbed 33.2 points, or 0.6 per cent, yesterday to close at 6049.4.

On Melbourne Cup Day, the index burst through the 6000-point mark for the first time since early January 2008.

It has now surged more than 7 per cent since early last month, boosting the value of the nation’s listed companies by about $108 billion.

Mr Sicilia said there were “strong tailwinds” supporting markets globally. Chief among them was the digital revolution – reflected in the rampant growth of technology titans such as Amazon, Google and Facebook – which was keeping a lid on inflation, he said.

“It is the root cause of failed attempts by central banks to spark inflation globally,” he said. “Unless technology disappears, inflation is unlikely to arise. That means the case for central banks to increase interest rates globally is weak.”

Mr Sicilia expected low inflation and interest rates to persist for much longer.

“The sharemarket remains the only liquid investment that provides adequate yield through dividends,” he said.

“The rate of arrival of technology is not decreasing anytime soon, so we expect markets to keep increasing.”

As the Australian stockmarket continued its rally yesterday, prominent banking analyst Jonathan Mott questioned whether the big banks would keep playing a major roll in the rise of the bourse.

Mr Mott, an analyst at investment bank UBS, said the commercial banks could hit headwinds next year amid the citizenship crisis in the Federal Parliament.