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The leisure & hotels sector is now at a four-year high

The latest Small & Mid Cap Review from KBC Peel Hunt notes that the world's equity markets are suffering a bout of profit taking, trimming advances over the past month in the UK to between 0.7 and 0.9 per cent.

However, the broker takes solace from the fact that the market is 'making progress despite the sell-off', adding that it's little wonder that some investors have decided to lock in some gains, given the strong rises over the past year.

The broker points out that the leisure & hotels sector is now at a four-year relative high. KBC Peel Hunt's favoured stocks are Restaurant Group, which recently lost the fight to take over pizza chain ASK Central, and pub owner Punch Taverns, who house analysts believe could eventually follow fellow pub group Enterprise Inns into the FTSE 100.

The group is also still keen on the insurance sector, which has out-performed the wider market on the back of decent results recently. However, 'upside remains for many stocks' and the broker picks out Chaucer and Hardy as its top recommendations.

Finally, KBC Peel Hunt is still telling clients to under-represent technology in their portfolios. An analyst attended a 3G telecom conference in Cannes and reckons TTP Communications and Imagination Technologies have 'much still to do to justify [their] current ratings'.