BofA Merrill Lynch: Fund manager confidence highest in almost four years

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A net 72 per cent of global investors expect the world economy to pick up over the next 12 months, according to August’s Bank of America Merrill Lynch Fund Manager Survey.

This number shows a “surge” from the net 52 per cent of respondents in July and is the highest amount in nearly four years.

More investors are bullish on the eurozone recovery than last month as well, with a net 88 per cent of European fund managers anticipating strengthening in the region by the end of 2013.

BofA Merrill Lynch European investment strategist John Bilton says: “The current earnings season shows global recovery reflected in European companies’ performance. With the eurozone the most undervalued major market by far, optimism on the region’s equities should be sustained.”

Specifically, sentiment towards China has improved within this time – with a net 32 per cent of investors in August expecting China economic growth to be weaker, compared to the net 65 per cent from the previous month.

Sentiment to emerging markets continued to suffer in August, with EM equity exposure falling to its lowest level since November 2001 at net 19 per cent underweight.

BofA Merrill Lynch Global Research chief investment strategist Michael Hartnett says: “While global growth expectations have risen very rapidly, the good news is that cash levels remain high. Out-of-favour emerging markets offer some enticing opportunities to deploy these balances.”

In terms of portfolio weightings, the percentage of investors overweight equities crept up to a net 56 per cent in August while those underweight to bonds increased to a net 57 per cent.

In terms of regional weighting, there was a decrease in exposure to Japan equities from 27 per cent in July to 19 per cent in August.

August also saw the third largest overweighting to US equities in ten years, coinciding with 72 per cent of investors favouring the US dollar over a 12-month horizon.

And stocks in the eurozone saw their highest allocation since January 2008, with a net 17 per cent of asset allocators saying they are overweight to the region – a further net 20 per cent said they would overweight the market on a 12-month view.

The month also saw the highest exposure to UK stocks since December 2002, with this being the first overweight reading since February 2003.