Australian shares slip

Australian shares slipped 0.9 percent on Friday following a weak offshore lead and ended 2010 with only their third annual fall since 1995, but investors and analysts predict a revival in 2011. The index fell 2.6 percent for the year after a 31 percent rise in 2009, although foreign investors still gained a 10 percent on their investment thanks to the strength of the currency.
Global miner BHP Billiton fell 1.3 percent. There was speculation that it was lining up a bid for US Oil and gas firm Anadarko, which the market values at $37 billion Investors said the market is cheap and with signs of global recovery and a likely rise in M&A activity from cashed up firms, the index should scale the 5,500 levels next year.
"The economy is expected to continue to grow strongly in 2011 and along with global strength. Shares should have a steady climb in 2011," said Craig James, chief economist at Commonwealth Securities. A Reuters poll in early December showed the benchmark index was set to rise to 5,200 by June and 5,400 by the end of the year.
The benchmark S&P/ASX 200 was 45.18 points lower at 4,745.20, at its lowest close in nearly two weeks, according to last available data. It has flirted with key chart resistance level of 4,800 for the past seven weeks but has not managed to sustain above it. The index ended the month 3.5 percent higher. The market is shut on Monday for a public holiday.
"At 12.5 times earnings, the index is now cheap based on historic levels. The global recovery and feverish M&A activity from cash rich Australian firms should underpin gains," Shane Oliver, head of investment strategy at AMP Capital Investors said. Deals worth close to A$8.5 billion have been announced over the last two weeks, suggesting the deals pipeline is ready to be uncorked in 2011.
Other miners were down on concerns over likely revenue and profit warnings after adverse weather forced coalmines to closed and declare force majeure. Rio Tinto fell 0.3 percent, Fortescue Metals Group dropped 3.7 percent. New Zealand's benchmark NZX50 index eased 0.8 percent to 3,309.03 but climbed 2.4 percent for the year.