By Robert Fenner Dec. 23 (Bloomberg) -- Australia’s benchmark S&P/ASX 200 index will fall to 4,500 by the end of next year, about 4.5 percent below its current level, as the drivers of commodity demand in 2009 are reversed, Bank of America Merrill Lynch said. There may be a “whiplash” in commodities, as the surge caused by new Chinese construction starts are unlikely to maintain their strength into next year, Tim Rocks, a strategist at Merrill Lynch, said in a Dec. 22 report. The benchmark index is headed for its biggest annual rise in 16 years after surging 27 percent so far this year, with eight of the 10 largest gains coming from mining stocks. The S&P/ASX 200 is trading at 16.8 times estimated earnings, compared with 9.6 times 12 months ago, according to data compiled by Bloomberg. “The Australian market is no longer cheap, earnings forecasts are already aggressive and the commodity producers have already seen the best of the recovery in demand,” Rocks wrote. “Commodity demand has the greatest potential for surprise of all economic variables in 2010, and unfortunately this is to the downside not the upside.” To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net

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