MARKETS SPECTATOR: Second half souring

Paul Brunker, JPMorgan’s Australian equity strategist, says his year-end S&P/ASX200 Index target of 4600 “now looks optimistic”.

Brunker says Australia’s stock market is in “for a tough second-half” this year.

The falling Australian dollar – which had fallen 0.8 per cent to US94.58 at 1249 AEST – has prompted more foreign fund manager selling and underlined a widespread perception the local economy is weak, he says.

“I think there is a bit more downside for the market,” Brunker told Markets Spectator.

At 1249 AEST the S&P/ASX200 Index was down 45.553, or 0.9 per cent, to 4679.90.    

The JPMorgan analyst says he finds it hard to see any widespread earnings upgrades that will force investors to become more bullish on local stocks. Commodity prices, Brunker predicts, are “heading lower” as China’s economy splutters.

He is recommending investors take “underweight” positions, relative to their market values, in bank stocks. He has a “neutral” view on miners BHP and Rio Tinto and Telstra as well as an “overweight” recommendation – compared to their market values – on energy and insurance stocks.