Bloomberg News

UBS, TD, Scotia Capital Forecast Canada Equity Gains for 2012

December 28, 2011

Dec. 15 (Bloomberg) -- The Standard & Poor’s/TSX Composite Index will rebound next year as Canada’s economy posts modest growth, according to strategists at Bank of Nova Scotia, Toronto-Dominion Bank and UBS AG.

Canada’s main benchmark index should hit 14,000 by the end of 2012, said George Vasic, chief economist and strategist for UBS Securities Canada Inc., a unit of Switzerland’s largest bank. That would imply a gain of 22 percent from today’s level of about 11,491, Vasic said at the Bloomberg Canadian Investment Outlook 2012 webinar in Toronto today.

“Our target of 14,000 is actually very conservatively constructed,” Vasic said. “Valuations are low, but they’re even lower than you may think they may be and that’s the result of the very strong profit performance combined with below-normal corporate bond yields.”

The S&P/TSX is about 27 percent undervalued, and if earnings are assumed to be flat and corporate bond yields rise by 50 basis points, the market would still be 10 percent to 12 percent undervalued, Vasic said.

Vincent Delisle, chief strategist for Scotia Capital, a unit of Canada’s third-largest bank by assets, forecast a rise of about 15 percent in the index, to 13,250. Delisle said equities should rebound in the second half of the year as China recovers.

The index will reach 12,800 in a year, according to Robert Gorman, chief portfolio strategist at TD Waterhouse, a unit of Canada’s second-largest bank. That’s an 11 percent increase. He said North America will probably avoid recession, though growth and inflation will be low.

The S&P/TSX index declined 15 percent this year, compared with a 3 percent drop in the Standard & Poor’s 500 Index.

--Editors: David Scanlan

To contact the reporters on this story: Colin McClelland in Toronto at cmcclelland1@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net


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