Australia's benchmark stock index is expected to end the year down about 4 percent, marking its first annual loss since 2011, but will more than recoup those losses in 2016, according to a Reuters poll. Australian shares barely moved last year and were pressured for much of 2015 by continued weakness in global commodity markets that hurt the export-driven economy and by higher capital requirements for banks.
The commodities price crash and concerns about slowing growth in China, Australia's biggest trading partner, have pushed the benchmark S&P/ASX 200 down about 5.5 percent so far this year to around 5,114 points on Monday. The median forecast in the poll saw the index closing at 5,200 at year-end. Estimates ranged from 4,900 to 5,750. But analysts expect it to rebound nearly 10 percent to 5,700 by the end of 2016. Estimates from 4,500-6,250.
"Next year, we should return to overall profit growth for the market and the drag from the resources sector should also start to abate," said Shane Oliver, head of investment strategy at AMP Capital, who expects the index to be 5,900 at end-2016. Record low interest rates at 2.0 percent, a weak Australian dollar, relatively lower valuations and regular inflows from the country's pension funds are likely to support the index, analysts said.
The poll of 15 analysts was conducted in late September, after the US Federal Reserve's decision to hold off from raising interest rates sparked fears of faltering global demand, especially in China. Analysts cited a further slowdown in China alongside weak global growth and inflation as the main risks to their poll estimates. Most analysts said they expect the Fed to start raising rates from December, a move that could rattle emerging markets despite the fact it has been flagged well in advance. "The bear market has begun," said Bill Keenan at Lonsec, who expects the market to fall to 4,600 by end-2016. "I still think there's downside in the banks, and the resources at spot (commodity prices) are still expensive."