Global investors have put some of their cash to work in spite of a more downbeat assessment of global growth and corporate profits, a report said.
Investors have regained a muted risk appetite, turning to US equities, bonds and real estate, added the Bank of America (BofA) Merrill Lynch Fund Manager Survey for January, TradeArabia reported Wednesday.
The proportion of respondents’ overweight cash has tumbled to a net 17 percent from a net 28 percent last month. Average cash positions have fallen to 4.5 percent of portfolios, the lowest in six months, down from 5.0 per cent in December.
More than two-thirds of investors say equities will outperform other major asset classes in 2015. Accordingly, a net 51 percent of asset allocators are overweight equities, down one percentage point since last month but the third highest reading in the past year, the report said.
Less Optimistic
According of BofA Merrill Lynch, investors are less optimistic about the economy. A net 51 percent of the panel believes the world economy will improve this year, down from a net 60 percent in December. But, as deflation surfaces in the Eurozone, expectations of stimulus from the European Central Bank (ECB) are high.
This month, 72 percent predict QE to start in the first quarter. Furthermore, the third quarter is now the most likely timing for a rate hike by the US Federal Reserve, verses the second quarter a month ago.
Allocations Strong
Allocations towards equities remain strong despite concerns about the prospects for profits and margins. A net eight percent of global investors expect corporate operating margins to fall in the coming 12 months, up from a net one percent in December. The proportion of the panel expecting corporate profits to improve has fallen to a net 38 percent, from a net 46 percent.
Only a small minority believe that a double-digit rise in profits is possible in the coming year. A net 53 percent now say that it is unlikely profits will improve 10 percent or more, up from a net 32 percent in December.
Oil and Energy
Investors see value in oil and in energy stocks – but it seems too soon for them to have made a move. A net 45 percent of respondents say that oil is undervalued, up from a net 36 percent in December and at the highest level in exactly six years. At the same time a net 30 percent of the panel say that energy stocks are the most undervalued – up from a net 21 percent.
Allocators to energy and commodities remain weak. The proportion of investors’ underweigh energy stocks has increased in the past month to a net 25 percent from a net 22 percent.
With questions hanging over China’s economy, bearishness towards Global Emerging Market equities has intensified. A net 13 percent of asset allocators have under weight the region compared with a net one percent being overweight in December.
