Hope for shares

Experts see some upside for Aussie stocks, despite the current turbulent economic times.
"Our expectation of a softer Australian dollar in the second half of 2011 (92 US cents by year end) should boost interest from foreign investors - a group owning 40 to 45 per cent of our shares - and high corporate profits do point to a firmer sharemarket as well," says CommSec's Craig James, who sees the market dipping to 4900 mid-year and then recovering slightly by the end of December.
Toby Walker, Australian equity strategist at Morgan Stanley, says the investment house has not lowered its view of the stockmarket on the back of recent offshore events, including the Japanese catastrophe.
He says Morgan Stanley believes domestic market fundamentals remain intact.
"We are still looking for a reasonable year for equities this year, driven by earnings growth, particularly mining earnings growth," Walker says.
He adds that commodity price rises already seen are flowing into mining earnings but capital expenditure (capex), particularly mining capex, has yet to flow to the domestic sectors that service the resources industry.
"We are looking for 20 per cent growth this year, and not much [price-earnings] multiple expansion," Walker says, suggesting valuations remain attractively low.
"Our index target is 5350."
Last week BHP said it has approved US$9.5 billion worth of investments in its iron ore and coal operations, including US$6.6 billion to continue production growth at its West Australian iron ore operations.
Deutsche Bank equities strategist Tim Baker says the increased capex will help drive consumer spending, which in turn will help drive a more robust showing by industrial companies which have largely lagged their resources counterparts in earnings and share price growth.
Baker sees the benchmark stocks index at 5500 by the end of the calendar year, making him the biggest bull of the four forecasters polled here.
He says the forecast is driven, in part, by the market's relatively cheap price-earnings multiple, well below its traditional 14 or 15 times forward earnings.
"We're at a very attractive valuation of about 11 times," Baker says.
He adds that strong commodities prices will support the economy, and the stronger economy will help drive the keenly awaited pick-up in the industrial sector.

Source: Morningstar