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Five things to watch in Aussie stocks

AAP logoAAP 14/12/2016 Ethan James

After a tumultuous year headlined by Brexit and Donald Trump's election as US president, share markets around the world appear to be on track to gain momentum in the first half of 2017.

Financial services company Credit Suisse has picked five themes for investors in Australian equities to keep their eye on next year.

1. BOND INVESTORS MOVE INTO EQUITIES

Globally, Credit Suisse says investors will continue shifting from bonds into equities and that means Australian stocks offering stable, bond-like income streams such as Sydney Airport, APA, Healthscope, ASX and BWP Trust are also less attractive.

2. CHINA REFORM CONTINUES

Chinese economic reform is set to ramp up following the 19th Communist Party Congress in September or October. Change is expected to focus on state-owned enterprises and the country's financial system. China is taking steps to stem capital outflows amid a low yuan but Credit Suisse says financial liberalisation will support offshore mergers and acquisitions in the long term.

3. AUSSIE YIELD STOCKS FADE FROM FAVOUR

Australia's big yield-focused equities have benefited, perhaps disproportionately, during the global search for secure returns over the past few years but that may begin to fade, says Credit Suisse. The global bank advises investors to focus more on stocks with the potential to grow dividends per share.

4. CORPORATE PROFITS RETURN

Credit Suisse predicts the ASX200 profit base to grow for the first time in three years by $10 billion to around $100 billion, marking a new phase in the Aussie equity market cycle. Companies including Bluescope Steel, Caltex, Henderson, Metcash, Myer and Suncorp are tipped for growth.

5. SUPERANNUATION INVESTMENT SLOWS

Following the federal government's recent changes to superannuation tax concessions, flows into super funds are tipped to be slower in 2017, with a resultant decrease in super fund investments in the share market. Credit Suisse tips there might be lower equity valuations and bigger discounts for capital raisings. Australia's $2 trillion superannuation pool is responsible for $30 billion to $35 billion worth of investment in the local share market every year.

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