NEW YORK and LONDON--19 Feb--PRNewswire-AsiaNet/InfoQuest
Hopes higher than at any point since start of credit crunch Fresh optimism over China's growth prospects has led to a marked improvement in economic sentiment globally, according to the Merrill Lynch
Survey of Fund Managers for February.
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Investors are at their most hopeful about the year ahead since the credit crunch took hold in July 2007, with the number who forecast a worsening economy in the 12 months ahead falling to a net -6 percent. This compares with a net -24 percent in January. The majority recognises, however, that the world
economy is in recession.
Fears of a prolonged slowdown in China appear to be fading. The number of investors who predict lower growth in China over the coming 12 months has fallen sharply, to a net 21 percent in February from a net 70 percent in January.
Similarly, severe pessimism about the outlook for corporate earnings has started to ease. A net 43 percent of respondents expect to see deteriorating profits over the coming year, significantly lower than the 63 percent who held that view in December. A net 49 percent of the panel predicts inflation will fall over the coming 12 months, compared with 64 percent in January and 82 percent in December.
"Fund manager expectations for Chinese economic growth rose dramatically to their highest levels since 2007, and faint global decoupling hopes now reside solely with China," says Michael Hartnett, chief Global Emerging Markets Equity strategist at Banc of America Securities-Merrill Lynch Research.
Commodities coming back as equity allocations shift into cyclicals Commodities have enjoyed the sharpest pick-up in terms of changes to asset allocations in the past two months. Investors hold a net 15 percent underweight position in commodities, down from a net 32 percent underweight in December.
Bond weightings were trimmed while equity allocations fell back to a net 34 percent underweight - the same position as in December. Investors have been pruning back their allocations to traditional defensive sectors and moving into more cyclical sectors.
Weightings fell in Telecoms, Insurance, Staples and Utilities. At the same time investors increased positions in Technology, Energy, Materials, Industrials and Discretionary Spending.
"Higher risk appetite, rising commodity sentiment and a strong valuation case could encourage further investment in energy and materials sectors. We see this as best played out through sterling-denominated assets," said Gary Baker, Banc of America Securities-Merrill Lynch head of EMEA Equity Strategy. U.S. in favour while Japan allocations fall
Appetite for U.S. equities has been reawakened in February, possibly boosted by poor market performance in January. The net overweight position in U.S. equities has risen to 15 percent this month, up from 7 percent one month ago. The U.S. benefits from having the best profits outlook, and 31 percent of
respondents want to overweight U.S. equities in the next 12 months.
At the same time allocations to Japan have fallen starkly with investors who hold a net underweight position of 26 percent, compared to 15 percent in January. Traditionally, Japanese equities would benefit from a broad pick-up in sentiment. Japan also suffers from having an overvalued major currency, according to the survey.
For the first time, respondents view the yen as more overvalued than the euro. Pessimism over the euro has broadly moderated, while the region's macro-economic outlook is somewhat more favorable.
"Eurozone growth expectations picked up to the highest level in 12 months in February," said Baker. "But in contrast with the global picture, the number of European portfolio managers overweight cash spiked to the highest level since October 2001."
Survey of Fund Managers
A total of 212 fund managers, managing a total of US$599 billion, participated in the global survey from 6 February to 12 February. A total of 177 managers, managing US$372 billion, participated in the regional surveys. The survey was conducted by Banc of America Securities-Merrill Lynch Research with the help of market research company Taylor Nelson Sofres (TNS). Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national
organizations. It is ranked as the fourth-largest market information group in the world.
Bank of America
Bank of America is one of the world's largest financial institutions, serving individual consumers, small and middle market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk-management products and services. The company provides unmatched convenience in the United States, serving more than 59 million consumer and small business relationships with more than 6,100 retail banking offices, nearly 18,700 ATMs and award-winning online banking with nearly 29 million active users. Following the acquisition of Merrill Lynch on January 1, 2009, Bank of America is among the world's leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to more than 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients in more than 150 countries. Bank of America Corporation stock is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange. Many of the bank's services to corporate and institutional clients are provided through its U.S. and UK subsidiaries, including Banc of America Securities LLC, Banc of America Securities Limited, Merrill Lynch, Pierce, Fenner and Smith Incorporated and Merrill Lynch International. For
additional information, visit www.bankofamerica.com .
Merrill Lynch
Merrill Lynch is one of the world's leading wealth management, capital markets and advisory companies, with offices in 40 countries and territories and total client assets of approximately $1.5 trillion at September 26, 2008. As an investment bank, it is a leading global trader and underwriter of securities and derivatives across a broad range of asset classes and serves as a strategic advisor to corporations, governments, institutions and individuals worldwide. Merrill Lynch has approximately 50 percent ownership in BlackRock
Inc., one of the world's largest publicly traded investment management companies, with approximately $1.3 trillion in assets under management at December 31, 2008. For more information on Merrill Lynch, please visit
www.ml.com. Merrill Lynch was acquired by Bank of America on January 1, 2009.SOURCE: Banc of America Securities-Merrill Lynch Research
CONTACT: Reporters: Susan McCabe Walley
+1-212-449-0389
[email protected], or
Tomos Rhys Edwards
+44 20 7995 2763, [email protected]
both of Banc of America Securities-Merrill Lynch Research
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