Merrill Lynch Fund Manager Survey Finds Chinese Economic Optimism Fuelling
Improved Growth Outlook
NEW YORK and LONDON, Feb. 18 /PRNewswire-AsiaNet/ --
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.
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.
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markets and advisory companies, with offices in 40 countries and territories and
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SOURCE: Banc of America Securities-Merrill Lynch Research
CONTACT: Reporters: Susan McCabe Walley
+1-212-449-0389
susan_mccabe@ml.com, or
Tomos Rhys Edwards
+44 20 7995 2763, tomos_edwards@ml.com
both of Banc of America Securities-Merrill Lynch Research
(BAC)
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