Australian equities should present investors with a good medium-term buying opportunity, according to Fidelity International.
While macro fears are likely to dominate the Australian equity market, at least in the short term, it is often these large economic dislocations that provide some of the best buying opportunities, Fidelity Australian Equities Fund portfolio manager Paul Taylor said.
"The market is currently very attractively valued, and with an earnings recovery well under way, it should present a good medium-term buying opportunity," he said.
"While it is always very difficult to predict short-term movements in the market, there are currently some very high quality Australian companies trading at very attractive valuations, which bodes well for the Australian market on a medium-term investment horizon."
As economic growth starts to normalise in 2010, Fidelity expects the market to move away from cyclical growth and increasingly focus on structural growth, Taylor said.
"Companies that can deliver good earnings growth due to their structural growth opportunities are likely to be bid up during 2010," he said.
"This transition from cyclical to structural growth is much less about one sector versus another sector, but much more about stock-specific factors, especially those that reflect the strong structural growth opportunities."
Looking to the global equity market, Fidelity said the sector would continue to grind slowly upwards for some months to come, with occasional medium-strength downward shocks as it struggles to overcome bad news.
"In absolute terms, global equities remain cheap and this gives me hope that when the market finally returns to more normal behaviour, an extended period of strong equity performance will follow," Fidelity head of global equities Ilario di Bon said.
"At points where investor confidence has suffered in the aftermath of each piece of negative economic data, we have taken the opportunity to slowly build our direct emerging market weight as investors sell off what they perceive to be their riskiest assets, guided by our overlying valuation sensitivity."
