CITI: Our Asian Clients Can't Believe We're Not More Bullish On US Stocks

Citi's Tobias Levkovich and his equity strategy were recently in Asia for client meetings.

And the big question clients asked: why aren't you more bullish on US stocks?

Currently, Levkovich sees limited upside for US stocks through the end of the year, and has a 2,200 year-end target for 2015, but clients in Asia saw this target as being too limited and conservative.

"A 10% total return in the next 13-14 months was perceived as being too conservative by many even as our year-end target is in line with mean and median top-down forecasts," Levkovich writes. "Interestingly, several clients suggested that our outlook was far below the bullishness expressed by other even when our numbers are pretty much well within the Street's consensus."

Levkovich chalks up some of this fervent bullishness from foreign investors on the US market to more challenged domestic economies and the unexpected strength witnessed in the S&P 500 this year.

As we've highlighted recently, back in the beginning of the year, only one Wall Street strategist highlighted by Business Insider saw the S&P 500 rising to its current level of more than 2,030.

Given the bullishness of Citi's Asian clients, Levkovich writes that, "there is evidence of a 'chasing the tape' mentality."

And another way some might look at the fervent bullishness of foreign investors on US stocks is that in a global economic environment where yields are low all around the world and economic growth appears just okay, the US stock market could become the "best house in a bad neighborhood." But if you're managing a mutual fund or a pension fund, you likely have a mandate to allocate those dollars somewhere.

Another takeaway from Levkovich's meetings was that fund managers in Asia were, "very positive on the Pharma/Biotech industry group, pushing back hard on our concerns while questions about technology names were few and far between."

And regarding biotech valuations, Levkovich noted that looking at the sector's trailing earnings and valuation metrics "raise questions about performance potential... but many want explain it away suggesting that new paradigm shifts exists and such thinking is always worrying to us."

On the heels of early 2014's huge selloff in biotech stocks, it is a curious takeaway that foreign investors look at this sector - and the stock market more broadly - are so ardently bullish.