01 Nov Oliver's Insights – Australian versus Global Shares
This note looks at the relative attractiveness of Australian versus mainstream global shares, which are dominated by the US, Europe and Japan.
The key points are as follows:
– Despite outperforming global shares over the last decade, Australian shares continue to provide better return prospects than mainstream global shares (dominated by the US, Europe and Japan).
– Australian shares pay higher dividends, should benefit from the stronger growth potential of the Australian economy when compared to other developed countries and after tax returns are boosted by franking credits. This justifies Australian’s maintaining their relatively high exposure to Australian shares compared to traditional international equity markets.
– As a result of these key return drivers, it is not surprising that Australian shares are trading on a higher multiple to earnings ration than global shares – they should be!