(Australian Associated Press)
The Australian share market faces a choppy year, with gains likely to come from select companies as the heavyweight bank and resource sectors come under pressure.
With central banks and their policies driving financial markets, coupled with slow underlying global growth, Wilson Asset Management portfolio manager Matthew Haupt expects local market conditions to remain challenging, and earnings growth to be limited.
“The next few months will be quite tough, and then maybe towards the end of the calendar year we might see some sort of recovery as we come out of the official bear market that the Australian market is in,” Mr Haupt told AAP.
“It’s really going to be a stock pickers’ environment.”
Within the benchmark S&P/ASX 200 index, Mr Haupt favours telcos TPG Telecom and Vocus Communications, plus pharmaceuticals group Mayne Pharma, because of their strong growth opportunities.
He thinks the market is underestimating TPG’s $1 billion network deal with mobile operator Vodafone Hutchison Australia in 2015, and synergies from its $1.56 billion takeover of iiNet.
“I think there’s enough tailwinds there for this company as they transition to NBN for most of their clients,” Mr Haupt said.
Vocus Communications recently merged with rival M2 Group, creating Australia’s fourth biggest telco, and he expects a lot of financial benefits from the deal.
Mayne Pharma may also have a bright future, given potential acquisitions in their branded drug portfolio. The group is also awaiting approval for a string of generic drugs from the Food and Drug Administration in the US, Mr Haupt said.
He expects banks and resource companies to come under further pressure, with the former facing rising bad debt provisions, which could led to dividend cuts, plus regulatory uncertainty.
Three of the nation’s four big banks, Westpac, ANZ and National Australia Bank, will report their half year results in early May.
Miners, including BHP Billiton and Rio Tinto, will also face further pain.
“I think the underlying growth is still very low, and I think China will continue to slow down so I think there’s still room to fall in resources,” Mr Haupt said.
Mr Haupt is to be the lead portfolio manager at WAM’s latest listed investment company, WAM Leaders.
WAM – which has more than $1.2 billion in funds under management – is looking to raise up to $330 million from selling shares in WAM Leader, which is set for a market debut on May 30.