MARKETS SPECTATOR: An unflinching ASX bull

Tony Brennan is, if not doubling his bet, reiterating it.

One of the market’s best-known bulls, the Citigroup strategist has raised his target for the benchmark S&P/ASX200 Index to 5400 this year from 5200. In the middle of next year Brennan says the index will reach 5600.

“With the market maintaining its recent multiple, gains can come with the growth in earnings in financial year 2014, which seems to be receiving continuing support from lower interest rates, widespread cost cutting and, most recently, with the Australian dollar falling,” writes Brennan in a note. “We’re looking for the ASX200 to move up by a further 10 per cent over the next 12 months.”

But Brennan says the recent sell-off in bank stocks “could go further” and he acknowledges the market valuation last week “moved a little to the high side”.

“We think more gains are still probable, even though almost inevitably the pace had to slow,” he says. “The market multiple remains only at around an average level, and this should be sustainable as the market still seems on track for moderate earnings growth in the 2014 financial year.”

At 1357 AEST the S&P/ASX200 Index was up 8.343, or 0.2 pr cent, to 4968.20. The index has gained 22 per cent in the last 12 months and 6.9 per cent this year. It is trading at a price-earnings ratio of 20.19 and a dividend yield of 4.53, according to Bloomberg data.