Strong Footsie rally forecast
CITY analysts predict that the FTSE 100 index will stage a strong rally in 2002 on the back of an anticipated economic upturn, a poll for the London Evening Standard's Business Day section shows.
Top banks and stockbrokers predict on average that the index will end next year at 5870, more than 700 points or 14% above its present level. The figures vary from the most bearish 2002 year-end forecast of 5500 points from Goldman Sachs and Merrill Lynch to the relatively bullish fund manager Gerrard, which predicts 6350.
Most UK equity strategists believe that stocks will benefit from a modest upturn in the global economy, led by the US. Several expect a continuing improvement in so-called cyclical sectors such as technology and telecoms at the expense of defensive safe havens such as tobacco companies. CSFB's Kevin Gardner, looking for 5900, said: 'We reckon this winter marks the weakest point in the cycle.'
All the teams were much too high on their forecasts for this year - the likes of CSFB, Barclays and UBS Warburg predicted 12 months ago that Footsie would end 2001 at 7000 or above. L&G predicted 7250.
Slightly more bearish was Khuram Chaudhry at Merrill Lynch, who a year ago put the end of this year at 6600 - revising it in the spring to 4900. For 2002, Chaudhry predicts mining firms Anglo American and BHP Billiton will do well, along with construction companies Berkeley, Barratt and Wimpey and mid-cap retailers Debenhams and JJB Sports.
He also favours Royal Bank of Scotland. He said: 'I still see a number of sectors suffering from oversupply in their markets next year. In areas like TMT (technology, media and telecoms) and chemicals I think there are too many companies doing the same type of thing. Sectors like mining and construction still have pricing power.' While predicting a year-end of 5500, he suspects the index will be higher during the course of the year, tailing off in the final quarter.
Gerard Lane, forecasting 5750 for UBS Warburg, broadly concurred with Chaudhry's sector picks: 'We anticipate that if the global recovery does take place, you will see strength shifting to globally exposed stocks like mining and chemicals.' That shift could come at the expense of retail banks and retailers, which have been resistant to global weakness.
NatWest Stockbrokers, which along with SG had a target of 5800 for the Footsie next year, is keen on the biotech sector and highlighted Oxford Glycosciences as a potential winner. Morgan Stanley and Barclays both forecast 6000 for next year, while JP Morgan and Dresdner Kleinwort Wasserstein both declined to go public.
