Goldman Sachs Asset Says Australian Stocks to Rise This Year on Earnings

Australian stocks should end the year higher as a rebound in business profits overshadows global economic growth concerns, according to the head of Australian equities at Goldman Sachs Asset Management.

Earnings reports last month revealed stronger balance sheets, boosting the chances of share buybacks, takeovers and better dividends, said Dion Hershan of Goldman Sachs Asset Management, a division of Goldman Sachs & Partners Australia Pty. The Melbourne-based executive declined to say how much higher the nation’s key stock index, which slumped 2 percent last month amid signs the U.S. economy is weakening, may climb.

“The rebound in corporate profitability is an encouraging backdrop,” Hershan said yesterday at the firm’s Sydney offices. “Noise from offshore has been an obstacle to equity gains. But that should change once people get more comfortable about the European banking system, the U.S. consumer, and an acceleration of growth in China.”

Corporate profits in the three months through June jumped by more than three times the amount estimated by economists, according to an Australian Bureau of Statistics report released this week. Australia’s benchmark S&P/ASX 200 stock index has plunged 7.7 percent this year through yesterday on concern Europe’s sovereign debt crisis, slowing growth in China, and a weakening U.S. economy will crimp demand for the nation’s commodity exports.

Australia’s economy grew 1.2 percent in the second quarter from the previous three months, the Bureau of Statistics said in Sydney yesterday. That was the fastest pace in three years, and beat the median estimate of 23 economists surveyed by Bloomberg for 0.9 percent.

Fairfax Media Ltd., Australia’s second-largest newspaper publisher, last month posted full-year earnings that beat analyst estimates, while BHP Billiton Ltd., seeking to take over Potash Corp. of Saskatchewan Inc., reported a doubling in second-half profit.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net

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