Australian fund managers are reassessing their portfolios following the ASX 200’s impressive 8.9 per cent gain in the June quarter, the best since 2020. Despite this strong performance, market outlook commentary remains cautious, with investors concerned about valuations, earnings momentum, and the U.S. fiscal situation. However, cash levels have decreased, indicating a willingness to invest, but a shifting in focus.
According to JPMorgan equity strategist Jason Steed, fund managers are taking profits from sectors like industrials, where overweight positions have fallen, despite the sector’s strength. Instead, they are increasingly favouring technology, with a record 64 per cent of managers overweight in the sector, double the level seen in March 2021. Steed’s analysis also highlights dilemmas around major stocks like BHP, Commonwealth Bank (CBA) and CSL.
Steed’s data shows local investors are wrestling with what to do about what he calls the big three – BHP, Commonwealth Bank and CSL. While most hold BHP and CSL, CBA’s significant rise has made it a more difficult stock for managers to evaluate. Morgan Stanley equity strategist Simon Clark suggests focusing on individual stocks with unique advantages, rather than relying on broad economic or sector trends.
Morgan Stanley points to companies like Charter Hall, benefiting from increased assets under management, and Suncorp, with potential capital gains from reinsurance changes. Tech stocks like WiseTech Global, a company providing cloud-based solutions for the logistics sector, Life360, and Data#3 are also highlighted as potential winners due to sector-specific growth drivers.
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