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Australia shares seen rising over 3 pct by year-end, more in 2018

* cpurl://apps.cp./cms/?pageId=stock-index-poll poll data

BENGALURU, Oct 5 (Reuters) - Australian shares are poised to end the year higher and extend that rise into 2018, a Reuters poll found, driven by broader optimism around the domestic and global economies and supported by dovish signals from the central bank.

After gaining 7 percent in 2016, the benchmark S&P/ASX 200 index is up a little under 1 percent on the year after a five-month run of falls stretching from May to September, dragged down by financials.

Financial stocks have been hurt by an investigation into back-to-back scandals at Commonwealth Bank of Australia that has already hammered the bank's share price and exposed it to fines that could potentially run into billions.

The S&P/ASX index is forecast to rise a further 3.5 percent to 5,900 points over the next three months from Tuesday's close of 5,701.44, according to the poll of 13 strategists conducted over the past week.

"There have been a lot of reputational risks that have been involved in relation to the CBA (scandal). But I think banks are now trading on their own merit," said Chris Weston, an institutional dealer with IG Markets.

"While interest rates are going to rise around the world under more normalised monetary policy settings, I think higher rates in Australia still seems to be a very low probability event. That's probably a bigger driver of Aussie banks."

The S&P/ASX is forecast to trade around the same 2017 closing level to the middle of next year, and some respondents then see the index pushing past the 6,000-point barrier to 6,400 by end-2018, according to a fewer number of respondents.

"With a benign interest rate environment here in Australia...our economic growth is just starting to kick up and that in turn will provide some confidence to the market," said James McGlew, executive director of corporate stock broking for Argonaut in Perth.

The Reserve Bank of Australia (RBA) held rates at a record low 1.50 percent on Tuesday and signalled it was in no rush to follow global policymakers in tightening as it wrestles with weak inflation and a strong currency.

RBA Governor Philip Lowe said policymakers will be mindful of the fact households are highly indebted, with household debt at an all-time peak of 190 percent of disposable income. Any increase in interest rates risks hurting consumer spending.

Although Australia's central bank is also concerned about a strong currency, equity market sentiment has been boosted by the RBA turning more upbeat on the economic outlook, led by an improving labour market.

Australia's jobs data blew past expectations to surge by the most in two years in August, yet unemployment was static as more people looked for work, limiting upward pressure on wages, inflation and interest rates.

Recent comments from Federal Reserve Chair Janet Yellen suggest the U.S. central bank will continue with gradual rate hikes, which is already priced into the market.

Simmering tensions on the Korean peninsula have also tempered optimism among stock market investors, but not by much.

"The geopolitical risk has been priced in quite a bit already. So, I don't know how much equity markets would necessarily sell off from that," said Argonaut's McGlew. "That would feed more into currency, and gold, or into precious metals."

(For other stories from the Reuters global stock markets poll) (Reporting by Christina Martin in Bengaluru; Additional reporting by Chandini Monnappa, Aditya Soni, Tom Westbrook, Shashwat Pradhan and Susan Mathew; Editing by Ross Finley and Rahul Karunakar)