PRESS RELEASE: BofA Merrill Lynch Fund Manager Survey Finds Surge in Support for Equities
Tue Jan 18 09:30:12 2011 EST
Investors Forecast, but Do Not Yet Fear, Higher Inflation
NEW YORK & LONDON--(BUSINESS WIRE)--January 18, 2011--
Positive economic sentiment has helped drive investor appetite for global
equities to its highest level in 3 1/2 years, according to the BofA Merrill
Lynch Survey of Fund Managers for January.
A net 55 percent of asset allocators say that they are overweight global
equities, the highest reading since July 2007. It represents a significant
increase from December when a net 40 percent was overweight the asset class. At
the same time, bond allocations fell. A net 54 percent is underweight bonds, up
from a net 47 percent a month ago.
Behind this rise is growing confidence in the global economy and corporate
profits. A net 55 percent of investors expect the world's economy to strengthen
in 2011 with 39 percent predicting "above trend" growth in the coming 12
months, the highest reading since the question was introduced in February 2008.
A net 57 percent believes that corporate profits will rise 10 percent or more
this year, up from 45 percent in December.
A growing majority expects global inflation to increase this year -- a net 72
percent in January, up from a net 48 percent two months ago. But higher
inflation is not seen necessarily as a threat. A net 42 percent of investors
believe monetary policy is "too stimulative," fewer than in November.
"The combination of growth optimism and a benign view towards higher
inflation provide a potent case for equity investment," said Gary Baker, head
of European Equities strategy at BofA Merrill Lynch Global Research. "Investors
believe monetary easing is working; in the absence of either tighter policy or
weaker data, equity enthusiasm looks contagious," said Michael Hartnett, chief
Global Equity strategist at BofA Merrill Lynch Global Research.
U.S. and Japan sentiment improves; emerging markets decline
Growing belief in U.S. equities, already evident in December's survey, has
firmed significantly this month. A net 27 percent of the global panel is now
overweight U.S. equities, the highest reading since November 2008 and
surpassing December's level of a net 16 percent.
A net 15 percent of the panel would like to overweight U.S. equities more
than any other region, up from a net 7 percent in December. A net 43 percent
expects the U.S. dollar to appreciate versus the euro or the yen on a
trade-weighted basis, up from a net 14 percent two months ago.
Japan has also benefited from improved sentiment. Global investors have moved
overweight Japanese equities for the first time since May 2010 and for only the
fifth month in 3 1/2 years. A net 5 percent of the global panel is overweight
Japanese equities, compared with a net 29 percent being underweight in
November.
Domestic Japanese sentiment is strengthening. A net 57 percent of respondents
to the regional Japanese survey expect the country's economy to improve this
year, up from a net 42 percent in December. Sentiment has improved steadily
since September last year when there was an even split between those predicting
a stronger economy and those expecting weakness.
Global emerging market support remains high but has continued to decline. A
net 43 percent of asset allocators are overweight GEM equities, but this is
lower than the net 56 percent two months ago. A net 20 percent of investors
want to overweight GEM equities more than any other region. This reading has
slipped from a net 31 percent in December. These lower readings come as belief
in China's economic prospects has eroded. A net 19 percent of respondents to
the regional survey say that China's economy will weaken this year. Two months
ago, a net 16 percent forecast a stronger Chinese economy.
Commodities investment, a bellwether for emerging market optimism, has fallen
with a net 16 percent of asset allocators overweight the asset class compared
with a net 22 percent a month ago. This fall comes despite the fact that
commodities traditionally benefit when investors expect higher inflation.
European investors feel New Year joy
European fund managers have started 2011 in stronger spirits. The proportion
of the panel predicting a stronger European economy has leapt to a net 44
percent from a net 26 percent last month. An increasing number believe European
companies will deliver improved earnings in 2011. This optimism comes as global
concerns about EU sovereign debt fund risk have fallen away from the highs of
December.
Survey of Fund Managers
A total of 199 fund managers, managing a total of US$562 billion,
participated in the global survey from 7 January to 13 January. A total of 169
managers, managing US$412 billion, participated in the regional surveys. The
survey was conducted by BofA Merrill Lynch Research with the help of market
research company 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.
The BofA Merrill Lynch Global Research franchise covers over 3,200 stocks and
880 credits globally and ranks in the top tier in many external surveys. Most
recently, the group was named 2010 Top Global Broker (second consecutive year),
Top Europe Broker, No. 2 U.S. Broker and No. 3 Asia broker by Financial
Times/StarMine. The team was also named Best Brokerage by Forbes/Zacks for the
second consecutive year.
In addition, the group was named No. 1 in the 2010 Institutional Investor
All-Emerging Europe and All-Latin America Research team surveys and No. 3 in
the 2010 Institutional Investor All-America Equity, All-America Fixed Income
and All-Europe Research team surveys. The group was also the winner of the
Emerging Markets' magazine EM Research Global Award for 2010.
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