Australia's benchmark share index is expected to make only modest gains from now to December, but it will reach its highest level since the global financial crisis by the middle of the year, a Reuters poll found on Tuesday.
The S&P/ASX 200 is expected to reach 6,000 points by mid-2015, a level last seen in February 2008, according to a median forecast of 11 analysts polled in the past week as low commodity prices and stretched valuations cap a four-year climb.
At that level the index would have climbed about 3 percent from Monday's close of 5,846.09. Estimates for the period ranged from a low of 5,500 to a peak of 6,150.
The median of 13 analysts forecast the index would hit 6,100 by December 31, with a range of 5,500 to 6,350. The index remains tantalisingly close to the 6,000-mark, which has proved a formidable barrier so far. Two attempts to break above that level this month failed as profit-takers were quick to emerge.
"I am not bearish on the market, it can go higher but it has gone ahead of itself, valuations are a bit stretched. So we could see bit more constrained gains, bit more volatility," said Shane Oliver, head of investment strategy at AMP Ltd.
The index is already up around 8 percent this year, fuelled by the Reserve Bank of Australia's (RBA) January decision to cut its cash rate to an all-time low of 2.25 percent. That led investors to pile money into dividend-yield stocks such as major banks and telecoms heavyweight Telstra.
Gains were also spurred by strong foreign fund inflow and investments by Australia's $550 billion self-managed pension funds, which own more than 16 percent of the shares listed on the ASX.
Australian shares barely rose in 2014, a far cry from the previous two years' strong gains following a crash in commodity prices that hurt the export-driven economy.
Still, they are among the most expensive in the world. The index is trading at a 12-month forward earnings of 15.7 times, higher than its 10-year average and compared to global average of 14.5 times, according to Thomson Reuters data.
Analysts say the index has the potential to far exceed 6,000 points if the RBA cuts interest rates again this year and the US central bank keeps rates unchanged.