Australian stocks are poised to see steady growth in 2025, buoyed by continued optimism surrounding lower interest rates and a recovering economy, though the pace of gains is expected to slow, according to UBS analysts.
UBS forecasts the ASX 200 index to reach a record high of 8,850 points by the end of 2025, marking a 5% increase from current levels. The index has already risen by 10.6% so far in 2024.
The brokerage highlights Australia’s economy and stock market as a relatively “safe haven” amid rising trade tensions and geopolitical uncertainties. Local demand is expected to further support the market, with investors likely to seek shelter from heightened U.S.-China tensions. Australia’s limited trade exposure to the U.S. shields it from potential tariff risks, and its strong security ties with Washington ensure it remains a vital ally in the Asia-Pacific region. This relationship largely protected Australia from tariff actions during President Trump’s first term.
UBS anticipates modest mid-single-digit earnings growth for Australian companies in 2025. The brokerage sees the end of the earnings downgrade cycle that has persisted since 2022, alongside an anticipated interest rate easing by the Reserve Bank of Australia (RBA). UBS expects the RBA to begin cutting rates in May 2025.
The firm favors technology stocks, driven by ongoing demand for artificial intelligence, and also highlights Australian insurance companies, which benefit from strong pricing power and attractive valuations. Industrial stocks are seen as a strong pick due to their exposure to the U.S. economy.
UBS also predicts that Australian mid-cap stocks will outperform in 2025, particularly in sectors such as technology, healthcare, and online classifieds.
The ASX 200 saw record highs in November, as improving global economic growth and optimism over stimulus measures in China boosted demand for economically sensitive sectors, particularly mining and resources, which are key to Australia’s export-driven economy.
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