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WRAPUP 1-POLL-Emerging markets take lead in equities rise

Published 12/08/2010, 09:17 AM
Updated 12/08/2010, 09:24 AM

* Emerging markets seen providing stronger gains

* Euro zone debt crisis weighs on minds

* All major indexes seen making gains through to end-2011

By Jonathan Cable

LONDON, Dec 8 (Reuters) - Major stock markets around the world will likely make steady gains over the coming year despite economic uncertainty and a lingering euro zone debt crisis weighing on sentiment, Reuters polls of over 300 strategists found.

While there will be no return to the massive rises seen by some indexes in 2009, double digit returns will not come as a surprise to investors.

Emerging markets are once again predicted to provide investors with bigger returns than their rich world counterparts, many of which will be forced to undergo tough austerity measures.

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Click here for graphic on poll: http://r.reuters.com/zuh29q

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Brazilian stocks will gain more than 15 percent by the end of next year as Latin America's biggest economy grows at a more sustainable pace. Fellow BRIC members Russia, India and China will see their key indexes rise 22, 19 and 16 percent respectively by the end of next year.

China has boasted one of the strongest economic growth performances this year but policy controls to rein in real estate speculation and a clampdown on bank lending has spooked investors.

China and India's voracious demand for natural resources will underpin gains in Australia's benchmark S&P/ASX index as the country looks towards its 20th straight year without a recession.

Russia's dollar-based RTS index rose a staggering 146 percent in 2009 and the more modest gains predicted for the coming year are still double what has been seen in 2010.

"As long as oil prices remain above the danger level of $70 a barrel, and as long as there is no world crisis, investors will become more interested in high beta markets like Russia," said Kingsmill Bond, chief strategist at Moscow's Troika Dialog.

COMMON CURRENCY CONCERN

There are fears an ongoing fiscal crisis in Europe which has so far seen the European Union and International Monetary Fund bail out Ireland and Greece could spread to other countries using the euro, with repercussions across the world.

"The issues in Europe won't just disappear overnight; they'll take a year just to stabilise and could blow up on us at any moment," said JJ Kinahan, chief derivatives officer at TD Ameritrade in Chicago.

Governments have spent hundreds of billions of dollars on economic stimulus packages and bailouts of banks, leaving a financial headache that will need to be paid back through budget cuts and tax rises.

Countries have seen unemployment remaining stubbornly high but confidence in the outlook has begun to pick up and data has been surprising markets to the upside.

France's CAC 40, which has lost over 3 percent of its value this year, is seen up by 10 percent by the end of next year as liquidity remains abundant and companies post strong profit growth.

Export-oriented Germany's DAX 30 index may reach a near four-year high by the end of 2011, notching up 9 percent gains as Europe's largest economy benefits from growing demand in emerging markets.

"Germany continues to benefit from rising emerging markets such as China due to its strong export focus," Commerzbank strategist Andreas Huerkamp said.

Steady economic improvement should fuel U.S. stock gains through 2011, boosted by an accommodative Federal Reserve, a potentially more business and investor-friendly Washington, and strong M&A activity.

Japanese stocks will also benefit on robust performances from neighbouring emerging markets and a U.S. recovery while Britain's FTSE will gain 8 percent as equity investors shrug off economic gloom.

"Despite concern over the housing market and unemployment, companies are now 'mean and lean'," said David Buik, senior partner at BGC Capital.

(Polling by Bangalore Polling Unit and correspondents in Reuters bureaux in New York, Toronto, Sao Paolo, London, Paris, Frankfurt, Milan, Moscow, Mumbai, Shanghai, Hong Kong, Seoul, Tokyo, Taipei, Sydney, and Johannesburg; Editing by Jon Loades-Carter)

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