Miners may lead ASX200 to 8000: Research Affiliates
Australia's big miners are cheap on a global basis and may drive the S&P/ASX 200 index as high as 8,000 points in the second half of 2021, according to Mike Aked, Director of Research for Australia at Research Affiliates (reports The Australian).
9th July 2021
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While banks have surged this year because of very low interest rates and the resulting rise in property prices Australia-wide, he says they are expensive on a global basis.
"Because our financial companies are expensive on a global basis and our miners are cheap, we would expect that Australian resource companies are much more likely to drive our local market higher over the second half of 2021, to fresh all-time highs over 7,400, possibly rising to as high as 8,000 given the momentum in commodity prices," he says.
While expecting banks to lag as the property stimulus fades, he says the miners are well positioned to take this lead as inflation news may "rattle markets until the end of 2021."
“While we do not know what the remainder of 2021 will bring, investing in a portfolio of cheap resource names that are positioned well for rising inflation seems a more robust investment strategy than investing in expensive financials, which will need continued property price increases to justify their price,” he said.
The S&P/ASX 200 Financials sector is up 19.3% year to date versus 10.4% for the S&P/ASX 200 Materials sector, but Mr Aked believes that miners will gain more than banks in a rising inflation environment.
“From here, resource companies should benefit from rising inflation more so than financials because their share prices are leveraged to the price increases of their biggest asset: metal and other resources still in the ground," he says.
"We are seeing strong gains in commodity prices with constraint supply and the continuation of the global economic recovery pushing up prices.
"Inflation treats resource companies well, unlike financial assets."
He expects property price growth to slow as prices are "now reaching unaffordable levels and wages aren’t growing.”
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