

EBC Markets Briefing | It is time for ASX to justify its valuation

The ASX200 flirted with its record high on Friday, trading at more than 18 times future earnings - a roughly 11% premium to its average valuation over the last decade.

Corporate Australia will release half-year earnings next week. While modest growth is expected, traders will scrutinise whether profits justify stretched valuations. A miss to expectations threatens to tip companies off their high valuations. Financial stocks are primed for decent earnings growth as they benefit from high interest rates, UBS analysts said. Aussie banks will see a "relatively benign reporting season" characterised by stable margins and solid credit growth, Citi analysts said. Elsewhere weakness in resources firms continues to be a drag on the market. While analysts see value in the sector after a dismal performance last year, weak Chinese commodities demand and higher operating costs remain upsetting. BHP has put takeover plans for the London-listed Anglo American on ice, according to people close to the company. Anglo’s copper assets are the rationale behind the bid as iron ore boom is fading. Woodside Energy warned Australia faces an “acute” challenge in keeping its position as one of the world’s leading energy suppliers in the face of Trump’s push to increase fossil fuel output.

The benchmark stock index stayed bullish above 50 SMA. The resistance lies around 8,550, a break of which is needed to break the record. EBC Financial Risk Management Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Financial News or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Learn more

Contact:

mkt@ebc.com

Disclaimer:

Investment involves risk. The content of this report is not an investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product.

Publication date:

2025-02-07 10:50:47 (GMT)

The terms and conditions of use set out below (referred to as "FX Blue's Terms"), form a contractual agreement governing FX Blue's relationship with you in relation to your use of this Website (“Agreement”) and you agree to be legally bound by FX Blue's Terms just as if you had signed this Agreement. By using this Website and any Information, you are agreeing to comply with and be bound by FX Blue's Terms, including any revisions that may be made to FX Blue's Terms from time to time. FX Blue reserves the right, in FX Blue's sole discretion, to change, modify, add or remove portions of FX Blue's Terms at any time by posting the revisions on the Website. You should check FX Blue's Terms periodically for changes as by using the Website after FX Blue posts any changes to FX Blue's Terms, you are agreeing to accept those changes, whether or not you have reviewed them, and you waive any right you may have to receive individualised notice of such changes. FX Blue's Terms may be supplemented by additional terms and conditions pertaining to specific content and activities. You agree and understand that such additional terms and conditions are hereby incorporated by reference to FX Blue's Terms. Your continued use of the Website means that you accept any new or modified FX Blue Terms.