In a new report, CIBC World Markets Inc. sees the TSX going to 15,000 by the end of next year, driven largely by resource stocks.

The firm argues that the 460-point decline in the TSX in May presents, “an ideal buying opportunity for investors who wish to leverage off further strength in global energy and base metals markets.

“While both sectors shared in the broad TSX correction in May, neither oil prices nor most base metals prices (notably nickel and zinc) warranted the decline,” it maintains. “They continue to be supported by 5%-plus global economic growth rates. Both sectors now look cheap relative to the current level of commodity prices, and more importantly, relative to the earnings stream that those prices will facilitate.”

The report says, as a result, it remains heavily overweight in energy, and to a lesser extent, materials stocks. “Further gains in resource stocks, particularly energy, should power the TSX to 15,000 by the end of 2007, even with lacklustre performance from the rest of the stock market,” it predicts.

It also remains overweight stocks at the expense of cash, where it has a zero weighting. Trusts continue to lead asset classes in returns, it notes, validating its double weighting in the sector. “Nevertheless returns have been heavily skewed to oil and gas royalty trusts, which account for almost half of the capitalization of the trust market. We are increasing our overweight in energy trusts this month on expectations of higher natural gas and oil prices this summer,” it says. “At the same time we are shaving our weighting of business trusts, whose performance has been disappointing this year.”

It remains underweight in fixed income, noting that, “the Bank of Canada has already strongly hinted that it is retreating to the sidelines in deference to a 90¢-plus Canadian dollar.” It adds, “We anticipate moving to a more neutral position on bonds once an even stronger Canadian dollar forces the Bank of Canada into rate cuts.

“Despite our attraction to rail stocks, we have trimmed our overweight in industrials in light of the soaring value of the Canadian dollar. A 90¢-plus dollar is going to have potentially negative impacts on manufacturing export earnings,” it concludes. “At the same time we are adding weight to utilities, whose valuations are likely to benefit from an end to the Bank of Canada tightening cycle. We remain underweight tech stocks, whose multiples still look unattractive as well as consumer stocks, which we expect to suffer as a result of rising energy prices and cooling growth in household spending.”