Australian share prices are expected to return to record levels this week as the market continues its strong start to 2005, dealers said on Friday. The benchmark SP/ASX200 index ended the week up 55.0 points or 1.4 percent at 4,098.9, while the broader All Ordinaries closed at 4,096.4, up 50.0 points.
Both indices had closed at record highs on Thursday before edging back Friday due to profit-taking.
AMP Capital Investors senior economist Bob Cunneen said the market was being buoyed by a resurgent banking sector and continued strength in resources.
He said the market's fundamentals remained positive, with attractive yields and solid profit growth helped by rising commodity prices.
"With profit growth slowing modestly, Australian shares are likely to post a total return of approximately 10 percent in 2005," Cunneen said.
UBS said in a note to clients it was moving to an overweight position in the banking sector after being underweight in 2004.
It said the move was based on cheaper relative and absolute valuations as well as reflected a shift towards a more defensive portfolio.
Meanwhile, the firm said concerns over economic health and earnings margins had diminished and the interest rate outlook appeared stable.
The Reserve Bank of Australia board is expected to leave rates on hold at its first meeting of the year on Tuesday of this week.
Investors would also be looking closely at December international trade figures due Tuesday and full-year earnings results from resources giant Rio Tinto on Thursday.
Trading interest may be centred around resurgent mergers and acquisitions activity.
Budget airline Virgin Blue was thrust into the limelight on Friday after major shareholder, Patrick Corp, launched an opportunistic bid for the 55 percent of shares it does not already own, valuing the low-cost airline company at 1.99 billion Australian dollars.