Shares tipped to bounce back after poor year

INVESTORS stung by the worst year for Aussie shares since 2011 should expect better returns in 2019, say advisers and economists.

Many are forecasting a sharemarket rise of about 10 per cent, recovering last year’s overall fall of 6.9 per cent but not clawing back all the value stripped from shares since they hit 11-year highs in August.

Volatility will continue in Australia and offshore but there are a few potential bright spots for investors.

One of them could be the big banks, said David Middleton, an adviser and director at financial planners MidSec.

“The royal commission exposed that our banks are not charities,” he said.

“Bad publicity has seen the prices of all the banks fall to the extent that all the likely bad news – and more – is already in the price.”

Mr Middleton said another area for potential growth in 2019 was Asian stocks, which were usually accessed through managed funds.

“The drift in economic and political power from the West to the East that started over a decade ago is becoming a surge,” he said. “China is probably the most important country in the world today.”

Chinese shares slumped 25 per cent last year.

Property and infrastructure companies such as Stockland Group, Sydney Airport and Transurban had also become cheaper and their income yields were rising, making these investments “now very attractive”, Mr Middleton said.

He said investors were nervous after a disappointing 2018 and disconcerting news was still around. “Our view is that the medium-term future looks good.”

AMP Capital head of investment strategy Shane Oliver said volatility was likely to remain high in 2019.

“But, ultimately, reasonable global growth and still easy global monetary policy should drive stronger overall returns than in 2018, as investors realise that recession is not imminent,” he said, although he warned global shares could head lower in the coming months.

“Australian shares are likely to do okay but with returns constrained to around 8 per cent with moderate earnings growth.”

Dr Oliver said shares should do better than capital city house prices, which were expected to fall another 5 per cent nationally, led lower again by Sydney and Melbourne.

CommSec chief economist Craig James forecast a shares rebound of 10-12 per cent this year, boosted further by dividends, as markets recovered from the fear of late 2018.

However, Rivkin Securities consultant Adeel Minhas said several uncertainties still loomed, including “American political dynamics, global trade concerns, and Brexit”.