* For poll data see
* FTSE 100 index to end 2014 at record high of 7,065
* Improving economic outlook, earnings momentum to help
* UK banks, materials and housebuilders seen performing well
By Atul Prakash
LONDON, March 20 Britain's top share index will
end the year at a record high as an improving domestic economic
outlook and growing optimism about company earnings boosts
investors' appetite for risky assets, a Reuters poll found.
The poll, conducted over the past week, showed the blue-chip
FTSE 100 index will climb to a new life-time high of
7,065 points by the end of 2014, over 7 percent higher than
Wednesday's close of 6,573 points.
The median in the survey of 38 fund managers, analysts and
traders is higher than the benchmark index's current record of
6,950.60 set in December 1999 but is lower than forecast in a
December poll. By the middle of 2014, the FTSE 100 index is
forecast to reach 6,820 points.
Following a drop of about 5 percent in the last two weeks on
tensions in Ukraine and concerns about slower growth in China,
the world's second-biggest economy, the FTSE is now down 2.6
percent for the year, against a 14 percent bounce in 2013.
However, analysts were again bullish on the market's
longer-term outlook on optimism about Britain's economic
recovery and improving company fundamentals.
"We expect double-digit earnings growth, helped by an
improving domestic economic backdrop, to provide the fuel for
the equity rally to continue," Robert Parkes, equity strategist
at HSBC Securities, said. "We have 'overweight' recommendations
on banks, materials, energy and telecoms."
Official data earlier this month showed manufacturing
strengthened in February and mortgage approvals hit their
highest level in January since November 2007, underlining the
momentum behind the country's economic recovery.
A Reuters poll last week said the UK economy will grow
faster than any other Group of Seven major industrialised
country in coming quarters. If forecasts for a rise of 0.6
percent per quarter through to September 2015 are met, the
economy will be back to its pre-crisis size by June.
"Although valuations are very high, as of the moment, there
seems to be little standing in the way of the momentum trade,"
Gerard Lane, strategist at Shore Capital, said. "The UK economy
being so strong and resilient would leave me to continue to
favour housebuilders despite them being very strong this year."
The Thomson Reuters UK Homebuilding index
has outperformed the broader market by rising 7 percent so far
this year after climbing 59 percent in the previous year and 64
percent in 2012, partly supported by favourable government
schemes such as the "Help to Buy" programme.
Thomson Reuters Datastream shows the FTSE 100 has become
relatively expensive, with its 12-month forward
price-to-earnings ratio at 12.8, against a 10-year average of
However, the market is likely to continue having a bumpy
ride on the way up, with issues such as the proposed move by the
west to impose sanctions against Russia following its actions in
the Crimea region and signs of a slowdown in China's growth
spooking sentiment, analysts said.
Some analysts remained cautious on the market's outlook
after recent sell-off to one-month lows.
"A lot of forecasters have suggested that we could well see
further gains in equity markets in 2014. This seems somewhat
optimistic against a backdrop of slowing emerging market growth
and a slowdown in the Chinese economy," said Michael Hewson,
analyst at CMC Markets.
"The time is well overdue for a reassessment of risk."
(For other stories from the poll see )
(Polling by Atul Prakash in London, Alexandre
Boksenbaum-Granier and Blaise Robinson in Paris; additional
polling by Hari Kishan and Swati Chaturvedi in Bangalore;
Editing by Toby Chopra)