Australian shares have continued to rise, moving closer to the psychological barrier of 5,000 points on strong overseas leads and positive company earnings results.
Better than expected Chinese exports and US labour data, along with hints of a rate cut in the eurozone aided global market sentiment.
In Australia, the Reserve Bank’s decision to leave rates on hold was shrugged off by economists, although the bank signalled on Friday its willingness to cut rates further to boost lower anticipated growth.
With the benchmark S&P/ASX200 index finishing the week stronger for the 11th time in the past 12 weeks, analysts consider further gains may be in sight should the bull market continue.
According to AMP Capital Investors, the average cyclical bull market over the past 68 years has returned a 126 per cent gain over a period just under four years. The current rally has posted a 26 per cent rise over 16 months, implying a level of 9,872 by September 2015 should the trend continue.
Saxon Mew, Investment Adviser at Wilson HTM, said rising share prices had attracted more investors back into the market.
“The mood has been positive after the recent good news from the United States and China. We think funds will continue to come into the stockmarket both here, in the US and Asia,” he said.
“Volumes have picked up and we’re seeing a lot more enquiries, with current clients putting more money into the market as well.”
Who’s hot: TLS
Fund managers reportedly welcomed the latest earnings result posted by Telstra (ASX:TLS) (click links for news and market data), which has seen its share price surge by 35 per cent over the past year.
The telecommunications company increased net profit by 8.8 per cent to $1.6 billion in the six months to December 31, maintaining its 14 cents per share, fully franked dividend. New mobile customers grew by 607,000, exceeding most analyst estimates.
Who’s not: SDL
Delays in the Chinese takeover of iron ore explorer Sundance Resources (ASX:SDL) have weighed on its share price.
The company’s board has backed a bid by China’s Hanlong Group of 45 cents a share, valuing the company at $1.4 billion. However, on Thursday, China’s National Development and Reform Commission postponed approval for the takeover by another six months to July 30th.
Takeover plays: BND
Despite talk of the end of the mining boom, the resource sector still has potential for takeover activity, according to Wilson HTM’s Mew.
He said Bandanna Energy (ASX:BND) was worth watching, with the Queensland coal explorer targeting first production at its Springsure Creek Coal Project in the first half of 2015.
“Bandanna will require a partner to provide additional capital for the project, and that could mean either a joint venture or complete takeover,” he said.
Stocks to watch: AGO
Iron ore company Atlas Iron (ASX:AGO) announced on Tuesday a 21 per cent increase in its Pilbara ore reserves to nearly 500 million tonnes, with its share price strengthening on the news.
The company may benefit from a higher iron ore price, which has rebounded from a 2012 low of US$86 a tonne to move above US$150 on a strengthening Chinese economy.
The week ahead
Australia’s earnings season will pick up speed in the week ahead, with reports due from companies including Commonwealth Bank of Australia (ASX:CBA), Computershare (ASX:CPU), Rio Tinto (ASX:RIO) and Westfarmers (ASX:WES).
In local economic news, housing finance data is due along with reports on business and consumer confidence.
Overseas, eurozone fourth-quarter gross domestic product data will be closely watched, while US retail sales and industrial production figures are also due.
Advice for new investors
“I’d still be buying blue-chip stocks such as the big banks and miners, even though many have increased by 10 to 15 per cent recently,” Wilson HTM’s Mew said.
“They all have gone on a run lately, but still have a long way to go so there’s potential for more capital appreciation.”
Previous market update: 01/02/2013
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A former ASX employee, Anthony Fensom has spent nearly 15 years in the financial/media industries of Australia and Asia. Having been through the dot.com boom and bust, the resources boom and the GFC, he is a great believer in patient investing and in understanding market and economic cycles.