Australian funds managers have made an about turn on their attitude to domestic equities after two years favouring global equities according to the latest Russell Investment Manager Outlook (IMO).

The latest IMO, which surveyed manager sentiment over the period from August 26 to September 4, showed that for the first time in two years, the 40 managers surveyed indicated a flight to familiar ground in domestic equities. This contrasts with US managers which downgraded US stocks with bullish sentiment dropping from 74 per cent to 69 per cent for US large cap growth stocks. Despite the overall favourable view by Australian managers for domestic equities most were hesitant about the medium term outlook. Of those surveyed most thought the S&P/ASX200 would start next year around 6,000 to 6,500, broadly within the current trading range. About 35 per cent of Australian managers now believe the Australian market is overvalued, down from 54 per cent the previous quarter, and Russell’s senior investment strategist, Andrew Pease, said there is a sense that the shakeout has returned some value to the Australian equity market. “;In net terms, managers are still more positive on international equities compared to local stocks, but the shift towards local equities reflects the view that Australia will probably be less affected than many global markets by the sub-prime fall-out,”; he said.

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