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The ASX share market saw plenty of volatility over the last 12 months, and FY25 could be another very interesting year. One expert has revealed which ASX sectors he sees as opportunities.
Ausbil’s chief investment officer (CIO), Paul Xiradis, has been investing for around 45 years. Xiradis thinks the market underestimates the strength of the Australian economy and how strong business profits may be in FY25, according to an Australian Financial Review report.
The fund manager suggests earnings by ASX companies could increase by 5%, almost double what investment bank brokers are forecasting.
Which ASX sectors could perform in FY25?
Xiradis had this to say about how FY25 may pan out for the ASX share market:
Looking into FY25, there are a number of sectors which are going to grow far greater than the 5 per cent we forecast [for the market], like healthcare, technology, and we even expect the banks to do a little better than markets project.
We also see the drivers of decarbonisation still contributing, and we think AI will be with us for many years to come and so we see more upgrades coming through even though valuations have shifted up.
While Ausbil has less of an allocation to the ASX bank share sector than the benchmark, the fund manager thinks bank margins will do better than expected when the market realises interest rates may need to remain higher for longer.
Xiradis commented on the banks:
We just don’t think there’s going to be a downshift in earnings. So we expect the banks to deliver a better outcome than markets expect, not by much, perhaps a few per cent, but it could be greater if it all falls in their favour
Ausbil is optimistic about AI, data centres, ‘smart’ warehouses and logistics, so it has stakes in Nextdc Ltd (ASX: NXT) and Goodman Group (ASX: GMG).
Mining and energy
The fund manager is also optimistic about the business case for beneficiaries of decarbonisation, such as companies that could benefit from growing demand for copper. Xiradis suggested the market will need to lift its expectations of how high copper prices could go because of the lack of new supply.
Ausbil is ‘overweight’ on BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO) even though iron ore prices have fallen. BHP has compelling exposure to copper and metallurgical coal, while Rio Tinto has appealing aluminium assets, according to the fund manager.
Xiradis is bullish on AGL Energy Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG), suggesting the energy sector has “significant potential” due to higher energy prices, high government support and a strong demand outlook.