Optimism improves but Europe holds back
GLOBAL - Fund manager optimism towards the global economies and investment markets has substantially improved to match recent market activity. But European fund managers are still reticent about moving assets back into equities, suggests Merrill Lynch's latest survey of fund managers.
Fund manager confidence in the global economies is at its highest level in almost six years, according to ML, as 75% of respondents said they believe the world economy will strengthen in the next 12 months.
Evidence can be seen to back this claim as average cash balances fell from 4.7% in July to 3.5% in the August survey, and equity allocations have risen steeply from 7% of fund managers being overweight equities in July to 34% in August.
Looking specifically at contributions from regional markets, European fund managers revealed they are slightly less optimistic than the group, as just 66% of managers are excited about the economic outlook.
Although investors have failed to inject new money, according to the survey, the net percentage of managers expecting earnings per share to improve rose from 23% in July to 62% this month.
Moreover, investors said they were shifting to an overweight position in basic resources, and "radically scaling back" their overweight positions in pharmaceuticals, according to Patrik Schöwitz, European equity strategist at Banc of America Securities-Merrill Lynch.
"European growth optimism has finally caught up with other regions, but fund managers have yet to fully act on this and cash levels have actually increased and overall sector conviction is near record lows," Schöwitz.
Analysis of the wider fund manager responses suggested emerging markets and technology stocks were described as the "strongest engines" behind a recovery, and investing in Europe is a little more popular than in previous months as just 2% said they are now underweight the eurozone.
Banking stocks are still relatively unpopular as uncertainty remains in all areas except emerging markets regions, as managers have a 10% underweighting at present.
Merrill Lynch's monthly poll, conducted between 7 and 12 August, contained the views of 204 fund managers, who managed a total of $554bn (€386.6bn) in assets. A total of 177 managers participated in the regional surveys.
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