Citigroup said it expects global equities to churn out another double-digit return in 2011 and upgraded the United States to "neutral." In a note dated January 05, the brokerage said it expects 2011 to be a year of "strong but uneven global growth." Citi forecasts 12 percent global earnings-per-share growth in 2011 and 9 percent in 2012.
-- Estimates 12pc global EPS growth for 2011
-- Forecasts 9pc global EPS growth in 2012
-- Downgrades Europe, excluding UK, region to underweight
The brokerage said it sees significant differentials in the growth rates of developed and emerging markets, pegging them at 2 percent and 6.1 percent respectively.
It expects the US economy to outperform in 2011, with a 2.5 percent GDP growth and sees Japan lagging with a 1.4 percent GDP growth after growing at 3.6 percent in 2010, partly because a strong yen is weighing on exports, Citi said.
The brokerage sees China remaining resilient in 2011 with a 9.2 percent real GDP growth following a likely 10 percent outcome in 2010.
It expects "China-style" real GDP growth of 8.6 percent in India and said Brazil is expected to generate decent, if not quite so spectacular, growth of 4.5 percent.
The brokerage expects Eurozone real GDP growth of 1.4 percent over the next 12 months, downgrading Europe, excluding UK, to "underweight."
Citi has a "overweight" rating on UK, global emerging markets and Japan, and rated developed Asia "underweight."
SECTOR STRATEGY:
Based on its belief in the ongoing global EPS recovery, Citi kept a cyclical tilt to its sector strategy. Citi upgraded materials sector to "overweight" and downgraded the IT sector to "neutral".
It forecasts the materials sector EPS to grow by an impressive 30 percent in 2011 and 13 percent in 2012. Within the sector, the stocks it likes include BHP Billiton, Grupo Mexico, Potash Saskatchewan and Vale.
Besides materials, the brokerage has "overweight" ratings on consumer discretionary and Industrials. Citi likes Amazon.com, Richemont, LVMH, Suzuki Motor and Gafisa within consumer discretionary, and Komatsu, Mitsubishi Corp, Turkish Airlines, Siemens AG and Deere & Co within industrials. Citi is "underweight" on utilities and energy sector, saying earnings momentum lags the rest of the market.
It also keeps its rating "underweight" on financials saying while the sector generally look cheap, the prospect of dilutive equity issuance should continue to be a drag. Besides IT, the brokerage is "neutral" on consumer staples, health care and telecoms.