 |
|||||||||||||||||
|
|||||||||||||||||
| hmh Newsletters | ||
| > | News | |
| Firm Profile | ||
| Choosing a Financial Advisor | ||
 |
Profit season one of many bumps on road to recoveryInvestors are hoping that the coming profit reporting season and the expected drop in corporate earnings do not dampen the optimism that the sharemarket can recover ground after its worst annual performance on record. After a grim 2008 that virtually wiped out five years of gains, analysts are expecting another volatile year, even through a bear market rally, underpinned by heavily depressed valuations, could provide some relief. The benchmark S&P/ASX 200 Index has rallied 11 per cent since it hit 3352.9 points in November. Futures trading indicates it will open up a healthy 107 points today. But the head of Australian equities at UBS Global Asset Management, Simon Shields, said the impact of slowing global economies would flow through to company results in the February reporting season. “That’s going to continue to keep pressure on the sharemarket”, he said. Citigroup strategist Graham Harman said 2009 was likely to be an “economically torrid” year, and companies were expected to report incrementally bad news on earnings. “I don’t believe the worst is behind us in terms of earnings or the economy, or unemployment and any of those variables,” he said, noting that company earnings could fall by 20 to 25 per cent in 2009 and 2010. He said while Citigroup was forecasting the benchmark index to be at 4500 at the end of 2009, there was a downside risk to that estimate. The S&P/ASX 200 Index’s 41 per cent loss in 2008 marked the worst calendar year on record for Australian shares, surpassing the near 30 per cent losses on the All Ordinaries index during the Great Depression and the 1974 oil crisis, and the 22 per cent fall in the last recession, in 1990. At its lowest ebb, on November 20, the market was down 51 per cent from its peak of 6828.7 points struck just one year earlier. Globally, stocks lost an average of 42 per cent of their value in 2008 according to the MSCI World Index, erasing more than $US29 trillion ($40.8 trillion) in value and all of the gains made since 2003. On the domestic market, five years of double-digit earnings growth came to an end in financial year 2008, with average earnings per share for the market falling by just over 1 per cent. Macquarie Research forecasts market EPS growth of 6.4 per cent for financial year 2009, although much depends upon the resources sector delivering growth of nearly 30 per cent. All other sectors are forecast to deliver flat to negative growth, with EPS estimated to fall by 16.5 per cent in the bank sector as bad debts rise and credit growth slows. In a sign of the rapid deterioration in economic conditions, the Reserve Bank of Australia slashed the cash rate by a total of three percentage points in the December quarter to a seven year low of 4.25 per cent as other central banks around the world also eased monetary policy aggressively. The market is fully pricing in another 1 percentage point cut at the RBA’s next meeting. Australian Financial Review – Monday 5 January 2009
|
|
|
|
:
Disclaimer
|
