Bourse's fate depends on capex puzzle

The sharemarket is tipped to start the week in positive territory, as investors await a clearer picture of the strength of the non-mining sector through the release of business spending expectation figures.

The local market ended four days of losses on Friday, and looks likely to stay in the black in Monday after US stocks reached another record high last week.

Private capital expenditure (capex) forecasts for the current financial year, in particular spending data for companies outside the mining sector, will dominate the market's focus this week amid questions over whether such industries could fill the gap left by the projected slide in resources investment. The capex data release from the Bureau of Statistics on Thursday will also provide final September-quarter figures.

The scrutiny of non-resources companies' spending intentions comes after the Reserve Bank lowered its 2014 and 2015 growth forecasts on the back of warnings of a faster than expected fall in mining investment.

"While in the last six months or so there has been a revival in consumer spending and the housing sector, via healthy sales, prices and an upturn in building approvals, the missing puzzle piece is the required turnaround in non-mining investment," said TD Securities head of Asia-Pacific research Annette Beacher.

Third-quarter capital spending was expected to fall by 4 per cent, economists said, with the weakening of equipment and building investment. Second-quarter business investment rose by 4 per cent to a seasonally adjusted $40 billion. Companies also lifted their estimates of expenditure for the 2013-14 financial year to $159.2 billion.

For non-mining investment plans to remain unchanged for the financial year, projected figures needed to be about $62 billion, Commonwealth Bank economist Diana Mousina said. "There is significant uncertainty as to how the non-mining business capex story will unfold," Ms Mousina said. "We need to see a lift in non-mining capex plans to support the growth transition."

ANZ economist Dylan Eades said he forecast either flat or modest growth in the fourth-quarter estimates of non-mining spending, as it was too early to see any updates in investment plans.

At the same time, not all spending plans for non-resources companies were captured by the ABS data, with agriculture, healthcare and social assistance, and education and training excluded, Ms Mousina said.

"These exclusions mean that non-mining investment in the capex release has underestimated actual non-mining investment detailed in the more complete GDP data," she said.

A softer than expected outlook of investment intentions would see the dollar, which closed last week at US91.83¢, come under further pressure and push up forecasts of another near-term RBA interest rate cut.