Themes And Preferences From Market Strategists

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            [1] => ((MGX))
            [2] => ((GRR))
            [3] => ((GBG))
            [4] => ((CWN))
            [5] => ((RMD))
            [6] => ((CFX))
            [7] => ((BOQ))
            [8] => ((MGX))
            [9] => ((RIO))
            [10] => ((ASX))
            [11] => ((NAB))
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            [1] => MGX
            [2] => GRR
            [3] => GBG
            [4] => CWN
            [5] => RMD
            [6] => CFX
            [7] => BOQ
            [8] => MGX
            [9] => RIO
            [10] => ASX
            [11] => NAB
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)

This story features MGX RESOURCES LIMITED, and other companies.
For more info SHARE ANALYSIS: MGX
The company is included in ALL-ORDS

By Rudi Filapek-Vandyck

Market strategists at UBS point out this morning -and rightfully so- that all the fuzz about whether the Christmas rally is going to push the Australian share market into positive territory for the year is a bit misplaced. Take into account the average dividend payout for the year and the share market is already 2% into the positive.

UBS has a positive view on what lies ahead for share market investors in 2011. The strategists see solid earnings growth momentum translating into mild expansion of Price-Earnings ratios next year and the combination of the two should make for quite a powerful cocktail. UBS anticipates returns of between 15-20% which should take the ASX200 index to 5500 by year-end.

In terms of asset diversification, UBS is mildly overweight resources, neutral banks, underweight REITs and overweight the industrials ex financials.

Meanwhile, resources analysts at Citi have decided to downgrade some of the iron ore juniors under coverage as share prices have continued rising, but Citi obviously doesn't see valuations rising at the same pace. Price targets have been adjusted higher, but earnings forecasts (!) for some of the juniors have moved lower. And so it is that Atlas Iron ((AGO)) and Mount Gibson ((MGX)) are no longer rated Buy. Grange Resources ((GRR)) still is and the junior has received the label of carrying the highest leverage to a potential further rally in prices.

Interestingly, Gindalbie ((GBG)) has managed to outperform most of its peers and Citi has retained its Buy rating for the stock.

Elsewhere, Citi's Global Equity Strategists are concluding that contrarian strategies have painfully missed the mark in 2010 as investors have done just fine by sticking with the general trends. Next year should bring more of the same and Citi's strategists conclude: "At the risk of appearing deeply un-cool, we would favour momentum strategies again in 2011".

Say the strategists: contrarians do best at big macro turning points, but next year is not such year. The prediction is that "momentum stock-pickers" will do best instead.

In line with UBS, market strategists at Morgan Stanley are talking "returns of 20%" for 2011. The rally will be carried by strong earnings momentum, ongoing ample liquidity, generally improving sentiment towards the US and… reducing local headwinds in Australia, of which RBA interest rate hikes and the Aussie dollar will be numbers one and two.

If Morgan Stanley's scenarios for 2011 play out as expected, then the following 11 characteristics should prove key for investment strategies and returns:

1) Two-speed World and Australian economies favours resources;
2) Two-speed inflation favours food retailers;
3) US growth surprises which favours (selected) US plays;
4) Chindia growth to remain robust which means more support for resources;
5) M&A in Recovery Mode;
6) Market rally favours cheap, market-related plays;
7) Shift in Energy Consumption toward natural gas favours energy;
8) Moderating Political Risks;
9) RBA should display a more gradual approach to rate rises;
10) AUD should remain range bound at a high level which favours multi-nationals;
11) a tougher operating environment for Banks

Finally, strategists at Macquarie made five changes to their Best Ideas for the months ahead ("Macquarie's Marquee Ideas"), with Crown ((CWN)), ResMed ((RMD)) and CFS Retail Property ((CFX)) now elevated to "Buys With Conviction" while Bank of Queensland ((BOQ)) and Mount Gibson ((MGX)) have been removed from the list.

Macquarie's Marquee Ideas now comprise of the following stocks in a positive sense: CFS Retail, Crown, Rio Tinto ((RIO)) and ResMed. ASX ((ASX)) and National ((NAB)) remain on the negative side of the Conviction List.

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