Investors stung by ASX’s April weakness, but hope remains
Aussie shares flirted with a record high in March but it’s been downhill since then. Can it rebound to fresh peaks this year?
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April was awful for stock market investors and May has been more of the same so far, but several shares specialists still see the S&P/ASX 200 index breaking above the the 8000-point barrier this year.
After flirting with 8000 when setting a record-high 7911 points before Easter, the benchmark index slumped more than 3 per cent last month and has fallen further since.
However, if a recent report by global asset manager VanEck proves correct, investors will enjoy a 9 per cent gain by the end of the year – plus dividends.
Not all forecasters are as bullish, with some tipping weakness in the coming months as the world works through geopolitical uncertainty, higher-than-expected interest rates and overvalued stocks.
The latest VanEck Australian Equities Outlook report says the ASX is set to reach 8300 by year’s end.
“Valuations are more attractive relative to the US and broader global equities,” VanEck portfolio manager Cameron McCormack said.
He said real estate investment trusts were well-positioned and gold companies were undervalued.
“Gold miners trading are at a 50 per cent discount to gold, presenting a strong value opportunity.
“Persistent inflation, a potential bumpy economic path and heightened geopolitical tensions could serve as a tailwind for gold miners.”
BetaShares chief economist David Bassanese said he expected the ASX200 to be near 8250 by the end of the year.
“I’m still confident – we are pretty close now,” he said.
“We have had a slump in corporate earnings but I think the earnings outlook is improving.
“The expectations for earnings in financial years 25 and 26 are quite positive and I think the market can be earnings-led from here.”
Moomoo market strategist Jessica Amir said much of the outlook depended on China.
“I think the power of the Chinese economy is going to drive the market higher,” she said.
“Every single Chinese readout lately has been better than expected.”
Ms Amir said mining and energy stocks could be “pockets of gold” that delivered the strongest share price growth this year.
“There is a possibility that we could get to 8000,” she said.
“However, the financial sector – if interest rates do stay higher for longer – is going to be tricky.
“It’s a question of can the commodities sector shine and can the financial sector hold steady?”
Capital.com senior financial market analyst Kyle Rodda said the Australian market was largely driven by global moves, and equities had become “a little overvalued”.
“We are seeing prices move back towards fair value and fundamentals,” he said.
“My view is there is still further downside for global equities to come. I think you will see, over the course of the next few months, a continued weakness in stocks.”
Mr Rodda said the market would gain strength from interest rates falling – which would make equities more attractive – or earnings growth picking up, but both were currently moving in the wrong direction.
“To see 8000 points we need one of them – if we don’t, 8000 will be hard to achieve,” he said.
“Prices overshot to the upside and maybe they will overshoot to the downside. That’s when buying opportunities come into the market.”
AMP head of investment strategy Shane Oliver has a 7900 year-end forecast for the ASX200.
“I think we will grind higher, about 4-5 per cent,” Dr Oliver said.
Originally published as Investors stung by ASX’s April weakness, but hope remains
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