Of course there remains a number of risks but we think a diminished concern is China. Not because volatility stemming from China will stop, but because the commodity sector weight in the ASX 200 has diminished considerably.
Let’s not forget there were 64 commodity (mining and energy) stocks in the ASX 200 in 2011. There are just 28 now.
At this rate we’ll say good-bye to the last of the commodity dinosaurs in 2020. While we are debating if and when the Aussie economy will transition, it seems that the equity market already has.
Commodity companies make up a paltry 13% of market cap (slightly larger than Commonwealth Bank) but were at 32% in 2011.
Staggeringly, this leads CS to conclude that:
Despite the grim start to the year we stick to our Dec-2016 ASX 200 index target of 6000
As of yesterday’s close Aussie investors should expect total returns of more than 20% by year-end.
US dollar investors will have to again negotiate a weaker AUD.
We expect the bull market in Aussie equities, which began towards the end of 2011, will continue.
Since then total returns for the ASX 200 have been more than 50%.
With a resources earnings calamity ahead ripping a huge hole in national income and housing tapped out, one can only ask where Credit Suisse sees the (bank) earnings growth coming from to drive the bull market.
You could go a long way before finding a more bizarre analysis.
