Global investment gloom receding, says survey

The pall over the global investment climate appears to be lifting, according to the latest survey of more than 200 fund managers worldwide conducted earlier this month by Merrill Lynch.

The results of the poll noted that while 17% of investors remained entrenched in defensive positions for equities, this was a sharp contrast from the all-time low of 41% who were underweight in March.

The percentage of fund mangers who viewed equities as undervalued also fell from 42% in March to 30% in the wake of sustained market rallies. Even hedge funds have raised net equity exposure to an 8-month high of 25%.

Those with an overweight position in bonds fell back to 9% in April, down sharply down from 26% last month, while cash overweights fell to net 24%, the lowest since late-2007.

Michael Hartnett, co-head of international investment strategy at Banc of America Securities-Merrill Lynch Research said, "The April survey shows that investors believe the worst is over and extreme defensive positions have been cut. But there is no bull market euphoria. The consensus has shifted from apocalyptically bearish to reluctantly bullish."

Exposure to global emerging markets (GEM) saw a marked increase to 26% among respondents in April, compared to 4% with an overweight view last month.

The US market is the only other region allocators say they are overweight at 14%, while Eurozone equities saw some pick with a net 29% remaining underweight, slightly better than Japan at 36%

The sharp rally in banking stocks in recent weeks has been met by a dramatic reduction in underweight positions on global banks to 26% from the record 48% in March.

The Merrill Lynch Survey of Fund Managers for April also revealed that a net 26% of respondents were of the view that the global economy would strengthen over the next 12 months, up sharply from the negative 24% in the corresponding January survey.

Gary Baker, co-head of international investment strategy at Banc of America Securities-Merrill Lynch Research noted, "China remains the principle catalyst but the optimism in global growth has now broadened out to all regions, including previous laggards Europe and Japan."

The improved sentiments for financials and optimism over growth has also led to sector rotations out of defensives in staples, telcos, pharmaceuticals and utilities into cyclicals such as industrials and consumer discretionary stocks, with technology becoming the most preferred global sector.

Interest in commodities saw a net overweight of 4%, its highest reading in 10 months. Gold is regarded as overvalued by 7% but oil is still seen as undervalued by a net 38% of respondents despite the 30% rise in the price of WTI crude over the last 2 months.

The survey, of 214 fund managers managing a total of US$561 billion, was conducted between 2 April and 8 April.

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