Benchmark ASX 200 Ends 2011 Down by 14.5%
Analysts and investors are divided on how the Australian stock market would fare in 2012. The division is because while dealers forecast that shares would rise 17 per cent in 2011, the year ended with the benchmark Australian Stock Exchange (ASX) 200 down 14.5 per cent at 4,140.4 at the last trading day of the year.
For the same year, the broader All Ordinaries index closed 15.2 per cent down in 2011 at 4,192.1. That meant the market lost $233 billion in value last year.
Donald Williams, founder and chief investment officer of Platypus's Australian Equities Fund, is one of those optimistic about the performance of the Australian stock market in 2012. His basis is a forecast of two more overnight cash rate cuts by the Reserve Bank of Australia and high commodity prices.
On the opposite end, some analysts and investors warned that only the strongest Australian companies would enjoy gains over the next 12 months as a result of the impact of an anticipated deep recession to be caused by the European debt crisis.
Neale Goldston-Morris, equity strategist of Macquarie, predicted that the ASX 200 would not go beyond 4,600 in the next 12 months due to the significant downside risks, unless the eurozone debt crisis would soon be resolved.
Economists warned investors that the first half of 2012 would be volatile while European leaders struggle to craft a solution to the debt crisis. However, for the second half of the year, it would be better for investors as people recognise the value of the strong Australian economy, which is expected to handle the global slowdown better than most economies.
James White, senior analyst of Colonial First State, even forecast returns between 12 and 15 per cent in 2012 for investors in Commonwealth Bank, AMP Capital and UBS. He also foresaw a break for superannuation fund holders who have long been suffering as the average balanced fund lost 1.5 per cent in 2011 on top of the 20 per cent lost in 2008.
He added that Australia made the right decision by hitching its economic wagon to China.
"The global economy has a lot to work through in the next six months but at some point Australia's value and the strength of China is going to shine through," White said.
