Tue, Jul 7, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

BofA Merrill Lynch fund manager survey finds confidence in China’s economy reaching three-year high

Tuesday, November 13, 2012
Opalesque Industry Update: Confidence in the outlook for China’s economy has surged to a three-year high, underpinning broader optimism about the global economy and equity markets, according to the BofA Merrill Lynch Fund Manager Survey for November.

A net 51 percent of investors polled in across Asia Pacific, Global Emerging Markets and Japan believe that China’s economy will strengthen in the coming year, the highest reading since July 2009. The monthly upswing of 46 percentage points, from a net 5 percent in October, represents the largest single-month increase since February 2009.

The survey suggests that optimism in the global economy is outweighing fears surrounding the U.S. fiscal cliff. A net 34 percent of the panel believes the world economy will strengthen in the next 12 months, the highest level since February 2011 and a monthly rise of 14 percentage points. A growing number of investors view the U.S. fiscal cliff as the biggest tail risk – 54 percent of the panel this month, up from 42 percent in October.

Corporate profit expectations rose significantly for the second successive month. A net 4 percent of investors believe the outlook for profits will improve in the coming 12 months. This compares with net 28 percent predicting a worsening in corporate profits two months ago. Equity allocations are rising, and 42 percent of the panel says they will opt to sell government bonds to make way for higher beta equities, up from 37 percent in October. Reducing cash levels is the second preference.

“Momentum has gathered behind the idea that we are on the cusp of a ‘great rotation’ out of bonds and into equities. The only missing ingredient is a resolution to the U.S. fiscal cliff,” Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research said. “While sentiment within Europe remains weak, rising allocations to global stocks tell us confidence in general is improving. The jump in China optimism shows how fast sentiment can turn around,” said John Bilton, European investment strategist.

Early signs that great rotation is underway

November’s survey suggests that the great rotation out of bonds into equities could be underway. Asset allocators have, for the fifth successive month, increased allocation to equities while reducing bond positions. A net 35 percent are overweight equities, compared with a net 25 percent in October. A net 35 percent of asset allocators are underweight bonds, up from a net 26 percent a month ago. More investors are expecting higher interest rates as inflation expectations inch upwards.

Little sign of risk taking is apparent in asset classes other than equities. Allocations to commodities are down this month, allocations to real estate are unchanged while the proportion of allocators overweight alternative assets ticked upwards by a two percentage points to a net 9 percent.

Emerging market appetite rises

Investors and asset allocators are showing appetite for a greater exposure to emerging markets. A net 37 percent of allocators are overweight Global Emerging Market equities, up from a net 32 percent in October. A net 30 percent of investors say that Global Emerging Markets is the region that they would most like to overweight in the coming year – up from a net 22 percent last month.

Shifts in sector allocations reflected a growing appetite for equities with exposure to emerging markets, especially China. A net 13 percent of global investors are overweight Industrials this month, a rise of 6 percentage points since October. The proportion of European investors overweight Automotives & Parts and Basic Resources rose by a net 11 and 21 percentage points respectively.

Sentiment split over Japan between domestic and global investors

While domestic investors are increasingly hopeful about Japan’s prospects, global investors remain cautious. A net 18 percent of Japanese investors expect the economy to strengthen in the coming year, compared with a net 30 percent forecasting deterioration in October. The panel is now neutral on the outlook for profits in the year ahead. Last month, a net 22 percent forecast worsening earnings.

Global investors are far from convinced that Japan’s outlook is improving. Asset allocators have moderately scaled back underweight positions in Japanese equities. A net 34 percent are underweight the region this month, down from a net 38 percent in October, but still a historically bearish position.

Bearishness over the yen has risen. A net 39 percent expect the yen to depreciate more against other major currencies in the coming 12 months, an increase from a net 23 percent last month.

Bank of America

Press Release

BM

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: New systematic strategy managed alongside research firm outperforms S&P500[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: An emerging CTA manager explains how he runs his strategy, which is based on an index produced by a research firm. Peter Turk is head of

  2. Opalesque Exclusive: New systematic strategy embraces machine learning[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The founder of a New York-based systematic trading firm, which offers a hybrid between alpha strategies and alternative feta at lower fees, describes his approa

  3. Larry Robbins' hedge fund Glenview buys 1m Tenet Healthcare shares[more]

    Komfie Manalo, Opalesque Asia: Glenview Capital Management said it bought an additional 979,482 shares at Tenet Healthcare Corp valued at $53.80 million, raising its stakes in the healthcare services company to 15.16%, reported

  4. Legal - Grayson’s hedge funds under scrutiny for possible ethics violations, Court rejects hedge fund’s motion to block merger of Samsung affiliates[more]

    Grayson’s hedge funds under scrutiny for possible ethics violations From Freebeacon.com: Rep. Alan Grayson is finding himself in hot water over managing hedge funds that bear his name, actions that are in possible violation of House ethics rules. Sitting members of Congress are prohibite

  5. Hedge funds decline in June as stocks tumble on Greek woes[more]

    From Bloomberg.com: Hedge funds posted losses across strategies last month as uncertainty over whether Greece will remain in the euro sent global stock markets tumbling. Winton Capital Management declined about 3.1 percent in June in its $12.1 billion Winton Futures Fund, leaving it down 1.9 percent

 

banner