MORE than $80 billion dollars will be wiped from the value of Australia's sharemarket by the end of the year - a prediction that throws more fuel on the inflamed debate about the value of investing in stocks compared with bonds - according to one of the country's leading equities strategists.
The managing director of global research at Bank of America Merrill Lynch, Tim Rocks, yesterday said the Australian bourse would lose nearly 7 per cent in value this year - a figure that flies in the face of other market predictions - as stifling financial conditions, dismal earnings forecasts and a troubled US economy depressed the stockmarket, dragging it down to the 4000-points mark.
The former Reserve Bank official said one of the major reasons for his prediction had to do with analysts' "incredibly over-optimistic" earnings forecasts for companies listed on the ASX.
"Earnings forecasts remain scarily high, both for the remainder of this financial year and for the 2012-13 financial year," he said.
"That failure of earnings forecasts has been one of the key reasons why the Aussie market has massively underperformed global markets."
And in a further blow to Australia's ailing property market, Mr Rocks said building activity would likely worsen before it got better, adding to investor concerns.
But Mr Rocks's view runs counter to the end-of-year targets for the ASX 200 from other financial houses.
The head equity strategist at Citi Australia, Tony Brennan, yesterday said the Australian sharemarket would likely finish the year up 450 points to 4750, an increase of 10.5 per cent from today.
The head of strategy and quantitative research at UBS, David Cassidy, said the ASX 200 would likely rise to 4700 points by year's end, an increase of 9.3 per cent.