Political stability brought by the new government of Malcolm Turnbull could be a key ingredient for equities in Australia in 2016, according to analysis by CLSA.
Australia is experiencing a little drag in economic growth from the resources investment slowdown. However, the latest official GDP number showed a healthy 2.5%.
“September 2015 saw Malcolm Turnbull become Prime Minister, leading to a bounce in consumer confidence,” write analysts Scott Ryall and John Woods in a year end note to clients.
“If this is sustained and we see a period of political stability, this could lead to further recovery.”
And share valuations look attractive, depending on which way you look at them.
“Valuations look reasonable,” CLSA says.
“On a headline basis, Australia still looks expensive compared to global markets. But this is skewed by the banks being expensive against global peers and resources stocks look expensive due to low commodity prices.”
However, Australia trades below average compared to developed markets when analysed on a sector-neutral basis.
“Our Top 15 list contains our preferred Australian exposures and is particularly weighted to stocks with structural growth exposures and/or restructuring,” the analysts write.
Here are CLSA’s selections for 2016: