Expert predicts ASX sectors to perform best in FY25

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The ASX sharemarket has seen a lot of volatility over the past 12 months, and FY25 could be another very interesting year. One expert has revealed which ASX sectors he sees as opportunities.

Ausbil Chief Investment Officer (CIO) Paul Xiradis has been investing for about 45 years. Xiradis believes the market is underestimating the strength of the Australian economy and how high corporate profits could be in fiscal year 2025, according to Australian Financial Review report.

The fund manager suggests that profits for ASX companies could rise by 5%, almost double what investment bank brokers are forecasting.

Which sectors of the ASX are likely to perform well in fiscal 2025?

Xiradis had this to say about the possible implications of fiscal year 2025 for the ASX share market:

Looking at FY25, there are many sectors that will grow much more than our forecast of 5 percent (for the market), such as healthcare, technology, and we even expect banks to do a little better than the market forecast.

We also see that decarbonization drivers continue to drive decarbonization and we believe that AI will be with us for many years to come, which is why we see continued improvements even though valuations have increased.

Although Ausbil has a smaller allocation to the ASX banking share sector than the benchmark, the fund manager believes bank margins will be stronger than expected as the market realises interest rates may need to stay higher for longer.

Xiradis commented on the banks:

We simply do not think that there will be a decline in profits. So we expect banks to do better than the markets expect, not much, maybe a few percent, but it could be better if everything works out in their favor

Ausbil is optimistic about artificial intelligence, data centers, “smart” warehouses and logistics, which is why it is interested Nextdc limited liability company (ASX:NXT) and Goodman Group (ASX:GMG).

Mining and energy

The fund manager is also bullish on the business case for beneficiaries of decarbonization, such as companies that could benefit from rising copper demand. Xiradis suggested the market will have to raise its expectations about how high copper prices can go given the lack of new supply.

Ausbil is “overweight”. BHP Group Sp. z o. o. (ASX: BHP) i Rio Tinto Sp. z o. o (ASX: RIO) despite falling iron ore prices. According to the fund manager, BHP has attractive exposure to copper and metallurgical coal, while Rio Tinto has attractive aluminum assets.

Xiradis is optimistic AGL Energy Limited (ASX:AGL) and Origin of Energy Sp. z o. o (ASX:ORG), suggesting the energy sector has “significant potential” due to higher energy prices, strong government support and strong demand forecasts.