Ahead of the upcoming Scottish independence referendum vote, global fund managers have increased their underweight stance in UK equities, with it now firmly entrenched as the world’s least popular region according to the latest Bank of America Merrill Lynch Survey.
A net 16 per cent of global asset allocators were underweight in the UK in September, up three percentage points from August, while 14 per cent of the panel said it was the region they most wanted to underweight in the coming 12 months.
Furthermore a net 20 per cent said the UK has the least favourable profit outlook, up from a net 12 per cent in August.
Whereas sentiment to the UK is falling, in the wake of recent monetary policy easing by the ECB, belief in Europe’s stocks has started to recover after a big drop in sentiment in August. In the wake of the decision to lower rates to close to zero, asset allocators increases their position in the region with a net 18 per cent overweight in September, up from a net 13 per cent last month.
Indeed while in August a net 4 per cent said they wanted to underweight Europe in the next 12 months, in September a net 11 per cent said it was the region they most wanted to be overweight in.
This could be based on their predictions of further policy action from the ECB, with a net 42 per cent of panel now expecting the central bank to start quantitative easing by the end of 2014, up from 32 per cent in August.
At the same time some 48 per cent expect the first rate hike in the US in nine years to take place in the second quarter of 2015, up from 38 per cent last month.
“This month’s survey highlights the end of the US and European central bank consensus – and as the first Fed rate hike since 2006 draws closer, we’ll see a new US dollar bull market and movement out of bonds,” says chief investment strategist at BofA Merrill Lynch Global Research Michael Hartnett.
An overall total of 202 panellists with $556bn of assets under management took place in the survey between 5-11 September.