Foreign Investors Spooked, See Risks Down Under

28 Jun

From the Sunday Telegraph:

Greece isn’t the only country giving investors the jitters.

While Australia’s challenges pale in comparison to those currently plaguing the debt-laden European nation, they are still spooking foreign investors who are taking their money out of our share market and running.

According to the national accounts, released this week, foreign investors sold $1.9 billion of Australian equities in net terms in the March quarter. This compares to the December quarter where they bought $28.5 billion of equities.

Economists believe foreign investors – the bulk of whom come from the US and increasingly Asia – are seeing Australia as a risky option for their cash due to concerns over our minority government, to interest rate rises and the carbon tax.

Concerns about a two-speed economy and the housing market are also scaring off overseas investors, according to AMP Capital chief economist Shane Oliver.

“There has been a lot of commentary from overseas that foreign investors are worried house prices here will drop and that that would adversely affect our banks and consumer spending,” he said.

“What also worries them is that a minority government means less certain policymaking. “On the carbon tax, they are concerned it could be implemented in a way that may adversely affect Australian mining or coal companies compared to say mining companies in other countries or that it may be too heavy-handed and adversely affect the economy.”

Mr Oliver said the jitters from foreign investors had contributed to the Australian share market under-performing global markets of late.

“Global shares have had a correction of about 7 per cent whereas our market has had a correction of around 10.5 per cent,” he said.

“You have this messy global backdrop, but because Australia has its own issues our market has come down a bit more than global markets.”

Mr Oliver said investors had been playing Australia more through the high dollar than the share market.

Foreign investors upping sticks was a wake-up call to the federal government, particularly on the carbon tax front, [Commsec economist] Mr James said.

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