Investors are betting the Australian market index can continue to push decisively beyond the 5000 mark for the first time in seven years as results from some of the blue-chip stocks and a rise in consumer confidence lent support to another round of buying.
With results for investor favourites Commonwealth Bank of Australia, Leighton Holdings and CSL meeting or bettering expectations, buyers sent shares soaring, with the S&P/ASX 200 index ending 44.6 points higher to close at 5003.
The chairman of broker Bell Financial, Colin Bell, said business was "vastly better" as investors now felt they could see a path through the gloom that swamped markets last year.
"No, it's not a boom but it just feels better . . . a lot better.
Brokers and financial advisers said the results added support to investors who have been moving out of lower yielding bond and bank deposits because of falling interest rates, and chasing stocks with high dividend yield and earnings growth potential.
"They (investors) are now getting more confident," said Alan Morey, principal at financial adviser Godfrey Pembroke in Melbourne.
"It is a shame they weren't more confident when the market was lower. The market still has a long way to go to get to its pre-GFC peak. So I am confident there will be more room for the market to continue to move on but it has probably hit a level where you need earnings to now drive further improvement in the market."
Our market would have to climb by 36 per cent to hit the 6828.7 level it reached on November 1, 2007. The index first broke through 5000 in March 2006 and since the GFC has twice touched the 5000 level, only to fall back because of global economic concerns that are now easing.
Analysts said that approaching the halfway mark for the interim results season, companies across a wide range of industries had reported pleasing results that highlighted management efforts to cut costs and expand margins when revenue growth had been flat. "Our market has been stifled so much because the earnings outlook has been consistently downgraded and the market has not been able to look ahead . . . and have confidence," said Tanya Branwhite, equities strategist with Macquarie Securities.
"They (results so far) are showing that things have stabilised."
Macquarie research has the market heading for earnings per share to fall 2.4 per cent this reporting season, with flat results for banks, falls for miners that have struggled with lower commodity prices and a modest improvement for industrial stocks.
Ms Branwhite said the 2.4 per cent fall was a modest improvement on the 2.8 per cent fall forecast before reporting season began but in line with the fall for the previous year.
Until now the gains in share prices have been achieved by expanding the multiple of earnings that investors are prepared to pay from an average 10 times last year to 13.5 times.
But the head of Australian distribution at UBS, George Kanaan, said while it was above the 10.5 times average during the global financial crisis, the price-earnings ratio was still below the 14.5 times that was the long-term average for the market.
"The market will probably go higher from here," Mr Kanaan said.
Yesterday was the first close above 5000 since March 2010 when it held that level for one day before beginning a fall to 4500. In April 2011 it got to 4971 before sliding back below 4000.
An Australian Securities Exchange spokesman said although the number of transactions on the sharemarket had been rising, the size of the deals had been falling.
