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World Stocks Set for 20 Percent Rise: Citi Report


Global stocks will gain 20 percent by the end of 2012, according to a report by Citigroup’s head of equity strategy.

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“We expect global share prices to rally, as the worst fears about corporate profits fail to materialize,” Rob Buckland wrote in the report called "The Road Ahead 2012: Global Equities."

Buckland said the MSCI All Country World Index — a commonly used benchmark for global stock funds — will gain 20 percent by end-2012 to reach 360 points, up from 300 points at end-2011.

“This implies a recoupling of global share prices and earnings per share over the year, but more through rising prices than falling earnings per share,” said Buckland.

But he admitted Citigroup’s 2011 target for the World Index had been overly bullish.

“We expected global markets to grind higher in line with slowing earnings per share growth. We did not expect markets to price in another global earnings per share recession ,” he said.

The MSCI All Country World benchmark fell by 9 percent last year, the weakest year since 2008. The index is now down 16 percent from its May 2011 high.

In the report, Buckland recommended investors should be overweight on both Japan and emerging markets, particularly those in Asia.

He also recommended overweighting the UK, which he described as a “contrarian” choice.

“The UK stands out as being one of the cheapest markets in the world, especially when compared to government bonds. Our economists forecast further Quantitative Easing in the UK; easier policy should help support equities,” Buckland said.