Australia's leading share index will end the year 14 percent higher, propelled a bit further by positive sentiment surrounding a new federal government and better prospects for the global economy, a Reuters poll found. The S&P/ASX index is forecast to close the year at 5,300 points, a 2.9 percent gain on Tuesday's close of 5,149, according to the median forecast from 13 analysts taken this month. Estimates ranged from 4,900 to as high as 5,500.
That will put the index near the five-year high of 5,314.3 points it reached on September 27, supported by a landslide election win by the conservative Liberal party, which ended six years of shaky Labor rule.
Improved prospects for the world economy now that the euro zone is beginning to grow again will also be supportive of the local stock market, forecasters say.
"We expect profit growth to come in line with a synchronised recovery from China, the US, Europe and Japan, which will help earnings to grow," said Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors.
A big positive for the Australian economy has been a sharp fall in the stubbornly high Australian dollar, which is expected to fall further according to the latest Reuters poll as the US Fed eventually winds down its asset purchases.
A drop of over 9 percent since April has eased competitive pressures and delivered a profit windfall to commodity exporters, whose products are priced in US dollars. Analysts pinpointed the industrials, materials and energy sectors as growth areas, following a declaration from new Prime Minister Tony Abbott to be known as "Mr Infrastructure." Abbott has pledged to support tens of billions of infrastructure growth.
The year-end median close is 100 points higher than the forecast by analysts in a June poll.
Since the September high, the benchmark has lost some 80 points as a partial government shutdown in the United States weighed on investor sentiment, though analysts believe that impact will be short-lived.
Looking further ahead, the poll gave a median forecast for the benchmark index of 5,500 for mid-2014 and 5,800 for end-2014.
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