Decisions by the Reserve Bank of Australia (RBA) could steer the domestic market in 2013, while volatility is set to continue, according to BlackRock.
Monetary policy will drive the Australian market amid tough economic conditions, according to research conducted by the management firm.
In the last financial year, Australia's two-speed economy, split between growth in the mining industry and a slumping construction and retail sector, was the primary concern of the domestic market.
"But in 2013, Australia faces becoming a one-speed economy, as mining investment peaks at a lower level, and earlier, than expected," BlackRock head of Australian fixed income Steve Miller said.
"Fortunately, smart monetary policy decisions from the RBA kept economic challenges at bay in 2012, giving us optimism that the same will occur in 2013."
BlackRock is also optimistic about changes in Asian monetary conditions expected to stimulate industrial production and global economic growth.
With 12 per cent earnings growth expected next year, investments in higher-yielding markets could post attractive returns.
"Valuations are not yet reflecting the improving fundamentals and Asian equities continue to trade well below their long-term average," BlackRock head of Asian fundamental equities Andrew Swan said.
"Investors could consider taking advantage of low valuations in Asia and look to the mid- to long-term investment potential in some of the specific sectors, including healthcare, industrial and non-bank financials in China."
Asian markets supported by improving sovereign risk fundamentals, such as Indonesia and the Philippines, will also continue to be an attractive option for investors.
