Equity Strategy: Morgans International Strategy Update

About the author:

Andrew Tang
Author name:
By Andrew Tang
Job title:
Analyst - Equity Strategy
Date posted:
11 November 2019, 11:00 AM
Sectors Covered:
Equity Strategy and Quant

  • International investing has never been easier with over 121 ASX Listed Managed Investments (LMI) and Exchange Traded Funds (ETF) ranging from index tracking exposures across geographies through to actively managed strategies.
  • In a lower-for-longer growth world, investors need to cast a wider net to achieve the same level of return they have been accustomed to over the past decade.
  • With the Australian equity market representing just 1.8% of the global market capitalisation, we think some of the best opportunities are missed with a domestically oriented portfolio.
  • In this update, we look at the options available for investments abroad and how investors can gain meaningful exposure to international markets and themes that we think will define the start of the next decade.

The importance of international diversification

The Australian equity market represents just 1.8% of the global total. The four major banks (ANZ, CBA, NAB, and WBC) and two major miners (BHP and RIO) make up over 25% of the domestic market.

The Australian market is not only small on a global scale but it is also highly concentrated in two sectors: Financials and Resources (c50% of the market).

Strong capital returns and consistent dividend streams have made these attractive investments for long periods of time, but in an environment where growth is scarce and dividend growth is limited, investors face the prospect of sub optimal returns and concentration risk.

International diversification provides exposure to different economic cycles and access to a much broader set of market thematics.

International investing has never been easier 

Investing offshore is no longer limited to buying and selling individual companies. Investors now have access via the ASX to over 121 internationally focused Listed Managed Investments and Exchange Traded Funds with products ranging from passive index tracking exposures through to actively managed investments.

Some listed products also offer the identical strategy in a hedged version which can mitigate the currency volatility.

In this update, we highlight our preferred international exposures and look at six themes that we believe will endure over the balance of 2019 and into 2020.  

Gaining access to emerging trends

The pace at which themes transform businesses is unprecedented today, but we believe this rate of technological change will be faster still over the next decade.

The exponential growth of data (doubling every 2-3 years), commoditisation of computing power and rise of a connected world (Internet of Things and 5G) will bring about incredible change for societies.

These trends, enabled by mobile connectivity as the bedrock platform, will hasten the rollout of nextgen technologies (autonomous vehicles, big data and artificial intelligence).

Investors need to look offshore for the best examples of companies associated with these emerging trends. 

More information

To view further analysis, Morgans clients can view the full research note. Alternatively, please contact your Morgans adviser or nearest Morgans office for access.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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