Australia's stock market is expected to rebound in 2016 after a disappointing year as easy money and a weaker local currency provide much needed support, a Reuters poll found. Tumbling commodity prices and concerns about slowing growth in China, Australia's biggest trading partner, have pushed the benchmark S&P/ASX 200 down around 8 percent so far this year. It closed at 4,957.2 on Friday.
The median forecast in the poll of 16 analysts put the index at 5,300 by the end of this year, representing the first annual loss since 2011. However, it is seen rebounding nearly 12 percent to 5,625 by the end of 2016. As usual the poll had a wide range, with HC Securities picking 4,500 in a year versus a 6,100 forecast by Morgans Financial. "Australian shares are likely to improve as the drag from slumping resources profits abates, interest rates remain low and growth rebalances away from resources," said Shane Oliver, head of investment strategy at AMP Capital, who sees the index reaching 5,700 at the end of 2016.
While Australia's A$1.6 trillion economy has not suffered a full-blown recession since 1991, it has been running below potential for some years. The biggest drag is from mining investment which is in full retreat after a decade of rapid expansion. The Reserve Bank of Australia (RBA) has kept its cash rate at a record-low 2 percent since May this year, and the local dollar has fallen over 12 percent since January 1, helping support growth. Analysts cited further weakness in commodity prices, the pace of the US Federal Reserve tightening and concerns about the domestic housing cycle as the main risks to their poll estimates.
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