THE Australian sharemarket will close the calendar year lower than forecast and a group of high-profile companies is preparing to ask investors for cash injections, Deutsche Bank said in a new report.
The report, by strategists Tim Baker and David Jennings, said the S&P/ASX200 would close at 4350 points by the end of 2012, compared with the bank's previous target of 4700 points, and will edge up to 4650 by the middle of next year.
The benchmark index closed flat at 4013.3 yesterday.
The predicted rise is driven by forecast earnings growth over the next one to two years, underpinned by Chinese demand for commodities and an improvement in conditions for industrial companies, the report said.
It listed a number of companies including Myer, Seven West Media, Leighton Holdings and OneSteel as stocks that could look at raising equity amid "challenging" conditions.
Conversely, the report is bullish on the financial services company Challenger, Primary Health Care, funds manager AMP, property group Lend Lease and casino company Crown, rating each a "buy".
"Earnings growth [for the 2011-12 financial year] is expected to be essentially flat for the market as a whole, and across each of the major sectors (resources, banks and industrials)," the report said.
"We do anticipate further downgrades, but nonetheless expect some earnings growth in the next 1-2 years, which should lift markets. China leading indicators are positive which should assist commodity prices. And industrials have been plagued by a variety of challenges which should ease (rising AUD, natural disasters, record low food inflation). In sum, there has been more breadth in this downgrade cycle than depth."
A note to clients from Joseph Palmer & Sons said that there was "some light appearing at the end of the American tunnel". "With interest rates in most developed Western economies low, stock prices similarly so and many companies increasing their dividends, it is worth investors directing funds to selective higher-yielding companies in the Australian stockmarket," it said.