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‘Fearful’ corporates stifling future growth: UBS

Written by Anton Murray Consulting on . Posted in Funds Management MC, Funds Management News, Investment Banking MC, Investment Banking News, Market Commentary, News

Tim Stewart, InvestorDaily

The decision by business leaders to preference dividends over new investment spending is undermining the potential for future economic growth, says UBS Asset Management. Head of investment strategy at UBS Asset Management Tracey McNaughton said workers, consumers and business leaders have been weighed down by what she called the ‘fear factor’ since the global financial crisis. Business investment has been “lethargic” worldwide, and inflationary pressure continues to evade the world’s developed economies – as indicated by Australia’s low inflation reading last month, Ms McNaughton said.

On the consumer side, the savings ratio in Australia has averaged 9.8 per cent of income since the GFC, more than double the average of the 20 years prior to 2008 (3.9 per cent), she said. “Just as the Great Depression left lasting scars on the household psyche, the GFC has left workers, consumers and business leaders fearful and conservative,” Ms McNaughton said. “Yield-hungry” conservative investors are encouraging companies for paying dividends and conducting stock buy-backs instead of undertaking new capital investment, she said.

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