TSX seen lagging Wall St for second year in 2012

Sun Mar 4, 2012 10:31am EST
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By Claire Sibonney

TORONTO (Reuters) - After beating Wall Street in the previous decade, Canadian stocks look set to lag for the second straight year in 2012, as relentless headwinds overseas drag on the Toronto Stock Exchange's hefty resource sector.

Canada's famously conservative banks and other financial stocks, which account for about a third of the market, could also be a liability, with some forecasting a bigger rise in U.S. banks on the back of an improving economy there.

While the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE has so far beaten market expectations for 2012 - nearing 12,800 points last month - it is still nearly 12 percent below its 2011 high around 14,300. <EPOLL/CA>

By contrast, the S&P 500 .SPX has reached its highest levels since the collapse of Lehman Brothers in 2008, and there is talk of further gains.

George Vasic, equity strategist and chief economist for UBS Securities Canada, said Toronto's three biggest obstacles could be its safe-haven gold stocks, banks that will not do as well in a run-up as their U.S. counterparts and energy prices that are already high.

"You have probably half the TSX right there not in the best shape," he said.

The S&P 500 has outperformed the TSX by 15 percentage points since the beginning of 2010 to the end of February 2012, and more than double that since the market rebound in March 2009.

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