Macro risks weigh heavily on Investors: Citi Survey

Stagflation, China's slowdown and a global energy crunch were top of mind for over 1500 investors, fund managers, CEOs and CFOs from across the world attending Citi's 13th annual Australia and New Zealand Investment Conference.

A survey revealed over 50 per cent of investment managers attending were adopting defensive positions against a fragile macro environment, with China front and centre as the largest threat to global growth.

The conference delegates voted on a range of topics in a sentiment survey – key findings included:

• 80% of investors polled expect Australia's Federal Government to set a Net Zero by 2050 target before COP26, with 61% expecting the target to include caveats.
• On China, 90% think China has not done enough to stabilize its economic growth in the face of Evergrande, Delta outbreaks and tech regulation.
• 40% of investors say China's slowdown is a big deal globally as China has been the marginal buyer and price setter in many physical and financial markets. While 40% say the slowdown is a big deal for Australia and parts of Europe due to exports, but less significant for the US.
• Looking at credit portfolios, 56% of investors stated they would shorten duration and stay defensive, with 25% stating they will extend duration, and 18% claiming they were bearish and prefer to build up cash buffers.
• In M&A, 36% of investors expect M&A activity to increase with new records being set in 2022, with capital availability, pent up demand and continued low interest rates driving the activity. Only 23% of investors stated Australia's foreign investment regime was too restrictive with 53% claiming it was about right.
• Asked if APRA's recently announced macro-prudential measures would be successful in slowing house prices and mortgage credit, only 39% stated it would be successful while 60% thought APRA would be back with stronger measures.
• When discussing the biggest issue facing the wealth platforms, 50% say margin pressure, while 33% say the key concern comes from increasing competition from new players and advice groups developing their own platforms as cloud based SaaS becomes more accessible.

The 2021 annual investment conference included a keynote session from Australia's Treasurer, the Hon Josh Frydenberg M.P who warned the widely expected economic contraction in the September quarter could be more than three per cent as a result of the coronavirus lockdowns in NSW and Victoria. This is larger than the two per cent-plus contraction he has previously estimated. "That being said, there is now light at the end of the tunnel," Mr Frydenberg told investors.

Former U.S Treasury Secretary, Larry Summers warned the combination of the record level of labour shortage in the US, inflation running at 6 per cent, GDP growth close to a double-digit rate, and 20 per cent housing inflation are a prescription for "overheating" suggesting the Federal Reserve Bank should have been moving towards tightening months ago.

Commenting on the poll results, Citi Australia's Head of Investor Sales, Mark Woodruff, said: "The record high level of attendance and participation from Citi's clients signals they are wrestling with many macro and micro risks. Topics such as higher inflation, a slowdown in China and the impact of higher energy prices were front of mind during the conference.

"The poll results indicate that beyond the macro influences, there is significant changes at a sector level that requires an understanding of both local and international influences, which is where the Citi conference stands out in terms of clarity and insight."

The two-day event was opened by Citi's CEO, Jane Fraser. Other speakers presenting included Reserve Bank of New Zealand's Deputy Governor, Geoff Bascand, Schonfeld CEO and CIO, Ryan Tolkin and Foreign Investment Review Board Chair, David Irvine.

Citi's leading global analysts on, equities, debt, currencies and commodities also shared insights and trade ideas, on a range of topics including Healthcare, Banks, Infrastructure, Property and ESG.