Rachel Hewitt
THE Australian share market ended a disappointing 2010 without any fireworks but investors face a happier new year.
Pundits predict the ASX 200 will climb up to 16 per cent this year after finishing 2010 almost 2.6 per cent lower than where it began.
It was only the third time in the past decade the market had ended the year in the red.
AMP Capital Investments chief economist Shane Oliver said “almost continuous scares” dogged investors, with fears of Europe collapsing and a hiccup in China’s growth, plus worries about higher interest rates and the negative effects of a red-hot Aussie dollar.
But, he said, continued economic recovery in Australia and offshore would trigger another year of solid company profit growth in 2011, “which will become harder for investors to ignore”.
Cashed-up company balance sheets would also spur more corporate deal-making, share buy-backs or higher dividends “all of which are normally good for shares”.
Commsec chief economist Craig James said shares offered a lot more to investors in the new year than some of the other markets.
Mr James expects the ASX 200 will end 2011 at about 5300 points – 11.7 per cent higher than yesterday’s close of 4745.2, which was down 45.2 points on the day.
Dr Oliver forecasts a bigger 15.9 per cent gain, predicting the market will end the year at 5500.
Morgan Stanley Smith Barney private client adviser Fabiola Gibson expects company earnings to grow about 20 per cent this year and an extra 10 per cent in 2012, driven mainly by strong commodity demand.
Asia’s voracious appetite for Australian minerals is expected to make mining stocks strong performers this year, as well as the companies that service the industry.
Materials was the market’s top performing sector by index in 2010, while telecommunications was the worst, sinking 18 per cent in line with Telstra’s shattered share price.
The discretionary retail sector also fell hard, down 8.3 per cent, but pundits are divided over whether retail stocks will pick up this year.
Ms Gibson said she expected a “muted” performance with further interest rate rises likely to dampen consumer spending.
But Mr James said he believed retail would recover because the strength of the jobs market and greater confidence meant “people will start to live a little bit more”.
Source: www. heraldsun.com.au
