Australian share prices may fall next week as investors take profits but the underlying trend is still up and the benchmark index could hit the 7000 mark by year-end, dealers said Friday. Over the week the benchmark S&P/ASX 200 index lost 42.6 points or 0.6 percent, to close on Friday at 6,706.3.
Eyes next week will be largely on inflation data due out on Wednesday, which has the potential to trigger an interest rate hike, widely tipped to take place before the end of the year. Dealers said if the inflation figures were within the central Reserve Bank of Australia's target range of two to three percent there might not be any rate increase, which would be good news for the government in the campaign for the November 24 election.
In the short-term shares are likely to fall further. "However, while there is a risk of a short term correction in share markets it is likely to be relatively shallow compared to the July to August correction and more broadly the trend in shares is likely to remain up," said Shane Oliver, chief economist at AMP Capital Investors.
"Share markets are still not expensive, profit growth is likely to remain reasonable and lower US interest rates will bboost liquidity and result in rising price to earnings multiples.
"As such, shares are likely to provide strong returns on three, six and 12-month horizons. With the Australian ASX200 index now having made it as high as 6800, our year-end target is now 7000."
Oliver said he did not think the inflation figures would be too bad. "With both the headline and underlying readings of inflation expected to remain within the two to three percent target range for inflation and at similar levels to the June quarter we don't believe that this will be bad enough to justify another rate hike this year."