Canadian share prices are expected to march higher in 2012 as resource and financial stocks get a boost from the calming of the European debt crisis and further signs of economic recovery in North America, a Reuters poll of analysts showed on Thursday.
The commodity-linked Toronto Stock Exchange's S&P/TSX composite index will climb to 12,725 by mid-2012, and to 13,275 by year's end - an 11 percent rise over last year's close, according to the median forecast given in the poll conducted this week of 32 market watchers. The index closed at 12,413.86 on Wednesday.
However, strategists and fund managers expect the TSX to hover near its current level over the next quarter, constrained by concerns about the financial stability of the euro zone.
"The European crisis has gone quiet for a while, but I think eventually, maybe mid-year, it's going to circle back and start creating some headlines again," said Marcus Xu, director of equity investments at Genus Capital Management in Vancouver.
Although the immediate crisis has eased, the region's banks remain weak, debt levels are still rising and fiscal targets are far from assured.
"We didn't really resolve that issue. We just put it on ice," said Xu.
Estimates for the index at mid-year ranged from 11,700-13,500, a sign of uncertainty and potential volatility. Targets for end-2012 were in a 11,400-15,000 range. But a commitment by the major central banks to keep interest rates low and to keep monetary policy accommodative should help markets avoid any sharp setbacks, and set the stage for a second-half rally. "You know what governments are going to do in the event of a slowdown," said Gavin Graham, president at Graham Investment Strategy.
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