How much further can the ASX 200 fall?
The Australian stockmarket will have “quite a bit further to fall” before it rebounds again, with March economic numbers expected to be ‘terrible’ as a result of the coronavirus, according to SG Hiscock.
Since the start of 2020, the ASX 200 has fallen 4.6% with the majority of the downturn coming from mid-February onwards. From a record high of 7,784 on 20 February, the index has fallen 11.2% to 6,908 points.
Stephen Hiscock, managing director at SG Hiscock, said this fall would be recorded in company’s earnings when they are reported at the end of March which would lead to company downgrades.
“We expect March quarter economic number will be terrible and we expect this is not fully reflected in company earnings. The recent reporting season saw most companies unable to quantify the impact of coronavirus. We expect to see lots of company earnings downgrades over the coming months as the impact becomes clearer, particularly in the travel, hospitality, discretionary retail and education sector,” he said.
He felt the Australian stockmarket would eventually rebound and lead to a stronger equity market but that it would need to fall further first. Since the start of 2019, the ASX 200 had returned 17.6%, according to FE Analytics.
“Longer term, with interest rates making record lows, this is bullish for the stockmarket, and once fears around coronavirus subside, we would not be surprised to see a stronger equity market, either later this year or next year,” he said.
“The only question is how low we go before this happens. It may be quite a bit further, because despite the recent falls, the Australian market is still up more than 10%, plus dividends, since the start of 2019 and despite the sell-off, valuations still remain somewhat elevated.”
Year to date performance of ASX 200
AUTHOR
Laura Dew
Recommended for you
The $673 billion global investment manager has appointed a former Zenith sales head as it seeks to expand its reach in the Australian wealth management market.
Fund managers may be operating in a squeezed environment, but a salary guide shows they are willing to pay up for specialist talent to diversify their fund range.
Reach Alternative Investments has entered into a strategic partnership with Russell Investments to bolster its wholesale private markets offering for financial advisers and investors.
Boutique investment consulting and research house Genium Investment Partners has announced a senior appointment to drive further growth in its research ratings business.
