Lehman Cuts 2008 Global Equity Target, Says Stocks May Rebound

By Patrick Rial

July 21 (Bloomberg) -- Lehman Brothers Holdings Inc. slashed its global equities forecast for 2008, saying that a target set in December was too optimistic while keeping a recommendation to buy stocks that it considers cheap.

The FTSE World Index target for the year-end was cut 13 percent to 362 by Ian Scott, the broker's London-based global strategist. That means equities are set to rise 16 percent from current levels.

``We have to accept that the year-end targets we established back in December are now unlikely to be met,'' the strategist wrote in a note to clients dated today. ``With stocks valued the way they are, it might not take much of an improvement in oil price, interest rate expectations, earnings, or the assessment of risk to bring forth a strong recovery.''

Scott cut his forecast for Asian equities excluding Japan the most, lowering his target by 22 percent, leaving room for a 26 percent gain by the end of 2008, he said. Estimates for the U.S. and Europe excluding the U.K. had the smallest reductions at 11 percent.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net