2019 will be recalled as a wonderful year for the Australian stock market, with ASX stocks making a mark domestically and globally. Top ASX Stocks were noticeably building investors’ sentiment positively and as we are hours away from 2020, experts are tipping another fantastic year.
According to the Reserve Bank of Australia (RBA), GDP growth in the country is expected to be approximately 2.75 per cent over 2020. Moreover, the underlying inflation is likely to pace up to 2 per cent in the initial months of 2020, and further increase by mid-2021 (approximately 3 per cent).
Global economic outlook
RBA believes that the outlook for the global economy appears reasonable. Risks like the US–China trade and technology disputes have lessened, and China is addressing risks in the financial system. Moreover, in most advanced economies, wage growth has picked up and the unemployment rates are low, even though inflation remains low.
Across the world, interest rates are at extremely low levels and central banks have edged monetary policy due to subdued inflation and the downside risks.
Financial market sentiment is boosted, and long-term government bond yields are around record lows. Borrowing rates remain at historically low levels in most countries (for both businesses and households).
What went well in Australia through 2019?
Closer to home, economists and stock market experts recommended patience as the biggest virtue in the beginning of 2019 for shareholders. The outlook of the country was subjected to price volatility driven by micro and macro-economic factors- trade war, a housing downturn, severe drought, elections and the Royal Commission’s role, to name a few.
However, as we end the year, the stability seems to be regaining investor confidence in Australia. This is primarily because the Australian economy appears to have attained a soft turning point, especially in the second half of 2019. Below are the reasons (for growth) that the economy is better positioned than how it was when the year began:
- The Australian dollar is at the lower end of its range
- The low level of interest rates- RBA left the cash rate unchanged at 0.75 per cent in its last meeting of the year in December.
- Recent tax cuts
- Ongoing spending on infrastructure
- The upswing in housing prices, especially in Sydney and Melbourne
- Lower mortgage rates are also boosting aggregate household disposable income
- Brighter outlook for the resources sector
- Unemployment rate has been steady at around 5 per cent
- The easing of monetary policy this year is supporting employment and income growth
Investment Options to Invest in ASX Stocks in 2020
2020 is likely to be a year of growth in Australia. However, the improved economy will still be exposed to the risks of the upcoming US Presidential Election and the Australian Government’s reforms to further stimulate the economy. Some experts opine that 2020 would highlight joint tailwinds from monetary and fiscal policy.
More infrastructure development, another possible rate slash, fiscal stimulus, Fed’s anticipated assistance to RBA with reforms are few events that will impact the economy, and consequently the stocks on the ASX.
Speaking of ASX listed stocks, housing and building materials stocks are likely to spur on. On the other side, the healthcare and technology sectors, which were amongst the strongest sectors of 2019, are now expensive, as per market experts.
So, what should be the focus of shareholders while updating/ upgrading their investing portfolio in the long run this upcoming year? The answer is simple- tap companies that deliver efficient earnings growth and maintain a valuation discipline in stock selection.
With the new record highs with Australia cutting rates, easing monetary policy pushing yields lower and asset prices higher and the recent pullback during the last quarter of 2019, experts believe that 2020 will be a good opportunity to buy into some of the more promising companies listed on the ASX.
Shares worth screening through for a 2020 investing portfolio
Disclaimer- The below information is opinions and should not be regarded as stock suggestions
One will agree that the most difficult part of locating the top ASX-listed shares (or any shares on an exchange) to buy is the ability to process a massive amount of information and factors to be able to traverse the macroeconomic and fundamental environment.
Below are three stocks that one can screen through while making some changes to the investing portfolio or embarking on the first foray into the world of investing in 2020-
Appen Limited (ASX: APX)
This global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence has been on of the most tapped information technology stocks of 2019 and is likely to be a good performer next year. The Company recently announced an increase to its 2019 full year earnings guidance, with full year underlying EBITDA estimated to be in the range of $96 million to $99 million for FY2019, ending 31 December 2019.
The increases in monthly relevance revenues and margins, largely from existing projects with existing customers along with the acquisition of Figure Eight is a huge bonus. As on 30 December 2019, the YTD return of APX is 83.13 per cent.
Opthea Limited (ASX: OPT)
Developing OPT-302 for wet AMD and Diabetic Macular Edema (DME), Opthea Limited is tapping the current and growing market opportunity of US$10B+ worldwide and has strong and growing commercial potential. It has recently raised $50 million through the issue of approximately 18.9 million fully paid ordinary shares.
The highlight of 2020 is likely to be the data of Ph 2A trial of OPT-302 in persistent DME, which is anticipated in 2Q CY 2020. The stock has an outstanding YTD return of 445.61 per cent (as on 30 December 2019).
Webjet Limited (ASX: WEB)
A high growth, market-leading global digital travel business - Webjet continued to deliver strong increases across all key metrics in FY19 and generated nearly $4 billion in TTV, with 5.5 million travel bookings across the globe.
A highlight of the Company is the WebBeds business, which has become its largest business in just over 6 years since it was first launched. In the APAC region, in just 3.5 years since launch, it is on track to deliver the most bookings by region for FY20. The Company believes that Webjet OTA will continue to outperform even though the market is challenging.
The FY20 underlying EBITDA is expected to be between $157 million and $167 million, up by 26-34% over FY19. The stock has a YTD return rate of 24.74 per cent (as on 27 December 2019).
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There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
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