Stock market experts envision 2022 and beyond
There is nothing more certain than more volatility.
Climate-sensitive investments and the pace of the post-pandemic rebound are key themes for 2022 as equity strategists begin to place their bets.
Australia’s stock market, still dominated by fossil fuel companies and banks, could be rocked by investors who want less carbon and more integrity.
“Every change brings opportunities, and the bigger the change, the greater the opportunity,” ANZ Chief Economist Richard Yetsenga said after the UN COP26 climate talks that are taking place. are held in Glasgow.
“The implications are significant. Businesses now have more certainty. But investment, fiscal policy and price signals are going to be needed.”
Paul Xiradis, executive chairman and head of equities, at fund manager Ausbil, said the move to decarbonization would lead to much greater engagement after COP26.
The market veteran told AAP it offers exciting opportunities in the electrification and metals of battery materials – copper, nickel, lithium and cobalt.
“We prefer BHP as a diverse exhibit to these themes, companies like OZ Minerals and 29 Metals in copper and zinc, Orocobre in lithium and IGO in nickel and lithium.
He said the Macquarie Group also offers good exposure to decarbonization and the push to electrify everything.
Meanwhile, Australia’s energy regulator has warned against investing in the new gas.
The regulator said in a backgrounder that falling demand could mean gas infrastructure would become a stranded asset – meaning it would be written off as worthless.
“As the impact of climate change is increasingly felt, companies are under increasing social pressure to invest and operate in a manner compatible with environmental sustainability as part of their corporate social responsibilities. The newspaper said.
Climate-related shareholder activism is also on the rise.
AustralianSuper, the largest pension and retirement fund with one in ten Australian workers as members, has committed to achieving net zero carbon emissions by 2050 in its investment portfolio.
The International Energy Agency suggests that investment in clean energy must more than triple from current global levels to around US $ 4 trillion (A $ 3 trillion) per year.
“It doesn’t end there,” said Mr. Yetsenga of ANZ.
Some cities are rethinking public transport to reduce the demand for infrastructure and energy.
“Health care, so essential to meeting the human costs of the pandemic, faces its own climatic pressures,” he said.
If the global health sector were a country, it would be the fifth largest emitter of greenhouse gases.
This does not prevent investors from supporting Australian healthcare giants such as CSL for its big, unassailable business models.
Ausbil also likes big banks, NAB and CBA in particular, because they enjoy positive economic growth conditions, when interest rates rise and have strong capital positions.
General insurers will benefit from higher margins and returns, with companies like QBE attractive, Xiradis said.
After the lockdown, with the borders reopening, he also expects positive earnings growth prospects for companies like Qantas, Webjet and Seek.
Travel, entertainment, dining and other leisure services are expected to benefit from pent-up demand.
The market is also not considered overvalued despite this year’s uptrend.
“We don’t think Australian stocks are too expensive on average when you look at them in relative terms to long-term interest rates and their outlook for earnings growth,” he said.
Macquarie Securities analyst Matthew Brooks says the equity market has benefited from the home economy and massive stimulus during the pandemic.
“At the end of the pandemic, the growth momentum will shift to services, some of which will experience a boom,” he said.
But 2022 could decelerate in the so-called goods economy – including housing, manufacturing, and raw materials – because they’ve already had a boost.
Macquarie Securities, anticipating less exuberance next year, advises Ramsay Health Care, with Cochlear and Healius in healthcare, Coles in consumer staples, Charter Hall in real estate, Amcor in packaging and Suncorp and IAG in insurance.
“We don’t expect the downturn to be a recession, but investors should prepare for volatility next year,” Mr. Brooks said.