Market future ’faces risks’
Argo sounds warning
THE outlook is “heavily contingent” on governments and central banks walking a “very fine line” not to fuel inflation or lead economies into recession, Argo Investments chairman Russel Higgins has warned.
Argo, with some $7bn in funds under management, posted an 80 per cent rise in profits to $312.9m for the financial year to June 30, fuelled by higher dividends from mining giants BHP and Rio Tinto, as well as benefiting from M&A activity.
But at the company’s annual general meeting on Monday, Mr Higgins said the withdrawal of government and central bank stimulus and the Russian invasion of Ukraine had created a market outlook with “more risks than normal”.
Argo has made few changes to its investment portfolio, however, notably accepting an offer from Canadian aquaculture company Cooke for its stake in Tasmanian salmon producer Tassal. The company has told investors it saw an opportunity in decarbonisation and was invested in lithium producer IGO and Lynas Rare Earths, both of which have performed well. The fund manager’s largest holdings, however, are Macquarie, BHP, CSL, the Commonwealth Bank, Wesfarmers, Rio, ANZ, Telstra, Westpac and the National Australia Bank.
Mr Higgins’ comments were echoed by the company’s managing director Jason Beddow, who told investors that markets were currently “extremely sensitive to macroeconomic and short term factors”.
“This uncertainty is adding to the increasing fear that, if inflation remains elevated, the prospect of a ‘higher for longer’ interest rate environment increases and the likelihood of a ‘soft landing’ for the global economy decreases,” Mr Beddow said.
“In this scenario, central banks will have to go harder to slow demand, creating further headwinds for equities.
“In comparison to most other countries, Australia is faring relatively well,” Mr Beddow added.
“However, as we enter 2023, interest rate rises will likely have a slowing impact on the economy and we may experience shockwaves from any number of global developments.
“We believe corporate Australia is in relatively good health and will be able to absorb a lot of this uncertainty.
“In addition, company balance sheets are strong, and unemployment remains low.”