Australia's leading share index is expected to end the year with a 16 percent gain, with momentum gathering pace in the second half on hopes for a resolution of Europe's debt woes, a US recovery and a soft landing for China, a Reuters poll of market analysts showed on Thursday.
The S&P/ASX 200 index, which registered its second sharpest annual fall in two decades in 2011 with a drop of 14.5 percent, has risen 7 percent since January and by the end of the year is forecast to reach 4,700, just over 8 pe r cent up on Thursday's close of 4,337.9 points. Forecasts given in the poll of 12 market watchers which was conducted over the past week ranged from 4,250 to 5,190 points. The median forecast for mid-2012 of 4,400, with a range of 4,300 to 4,620, is 5 percent lower than the level forecast just three months ago.
"Company fundamentals have supported higher index levels for some time, but global and macro considerations have held back investors," said CMC Markets' chief market strategist Michael McCarthy.
"A calmer outlook for Europe, a US recovery and a transition from industrialisation to consumer driven growth in China should lead the Australian share market higher over 2012," he added.
Share markets got off to a flying start in 2012 but have spluttered since mid-March when China lowered its growth forecast for the year and the likely slowdown has jolted sentiment.
For Australia, which has gained from an unprecedented mining boom, the risks of a Chinese slowdown are keenly felt. BHP Billiton , the world's biggest miner spooked markets last week after signalling that demand growth for iron-ore in China was finally slowing.
But Australia's central bank paints a more upbeat view on China, saying the slower growth target was good news as it is based on a more sustainable growth model.