Fortress Australia is good for our economy top investor says

The Australian equities specialist at one of the country’s top investment firms says lockdowns have a bright side for investors and the economy as Sydney extends its stay-at-home orders to contain the latest Delta outbreak.

ASX-listed investment firm Magellan’s portfolio manager Emma Fisher said the “first order impact” of lockdowns is negative, starving small businesses of income as major cities are brought to a standstill. But lockdowns also trigger additional government spending, fend off a tightening of monetary policy and maintain international border closures which ensure money keeps circulating within the Australian economy, she said.

“It enshrines lower interest rates for longer at a time when the conversation was shifting,” Ms Fisher said. “It increases the likelihood of some sort of stimulus package again. Those drivers are locked into place for longer.”

Magellan’s portfolio manager Emma Fisher says further lockdowns are good news for the local economy and ASX. Credit:Sam Mooy

Ms Fisher, who oversees a $126 million share portfolio, said Australia usually was a “net exporter of tourism dollars,” meaning Australians typically spend more during overseas trips than they do holidaying at home. Having shut the nation’s borders to contain COVID-19, the country has seen a boost to domestic travel which Ms Fisher said is good news for local businesses.

“Even if it takes us longer than we’re thinking to get out of fortress Australia, I don’t see that as a negative thing for our economy,” she said.

The ASX crashed in March last year by around 30 per cent after COVID-19 reached Australia and investors sold off shares amid uncertainty around the impact of lockdowns. Ms Fisher said this market reaction hasn’t repeated during the latest lockdowns thanks to the existence of highly efficient vaccines.

‘Even if it takes us longer than we’re thinking to get out of fortress Australia, I don’t see that as a negative thing for our economy.’

Portfolio manager Emma Fisher

“So when you look at this [Sydney] outbreak worsening yet the Aussie market is making all time highs, that seems a little incongruous, but markets are willing to look through it because they can see the finish line in sight,” she said.

Australia’s vaccine roll-out has been plagued by delays, and confusing health advice has caused vaccine hesitancy. Rising case numbers globally just as other countries relax restrictions have also prompted fears of the emergence of new vaccine-resistant COVID-19 strains.

Ms Fisher acknowledged there were “still a lot of unknowns” in regards to the pandemic, but said investors valued companies based on their expected cash flow levels over the next two to three decades. With vaccines guiding a path out of the pandemic, investors were now able to take a long-term view and view further lockdowns as “one-off” events, which would not rattle fundamental company valuations.

“So whether or not this has an impact for one month, three months, even 12 months, it doesn’t change valuations dramatically, in the way that March did last year, where everything fell 30 per cent on average ... It was pricing in Armageddon into perpetuity.”

Ms Fisher manages Magellan’s Australian equities fund, Airlie Funds Management, which has returned 33.7 per cent over the past year, outperforming the 27.8 per cent gain of the S&P/ASX 200. Ms Fisher said the fund’s strongest companies are those that are family-owned or have long-term management teams.

“Maybe it comes to the fact that family-led businesses are more willing to wear the hits in the short-term,” she said. “Obviously the desire from corporate Australia to focus on short-term earnings, the desire to hit short-term market expectations may sometimes lead you to do things that might not be the right decision in the long term.”

Magellan’s shares fell by 4.07 per cent in afternoon trade on Wednesday to $50.10 per share.

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Charlotte Grieve is a reporter for The Age.

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