Investors are positioning themselves for slower growth in China and prolonged low inflation \u2013 sending commodities allocations to a four-year low, according to the BofA Merrill Lynch Fund Manager Survey for May.<\/p>\n
A quarter of the respondents to May\u2019s survey say that a hard landing in China and a commodity collapse is their number one \u201ctail risk\u201d, an increase from 18 percent in April.<\/p><\/blockquote>\n
A net 8 percent of fund managers in Japan, Asia-Pacific Rim and Global Emerging Markets expect China\u2019s economy to weaken over the next 12 months, compared with a net 9 percent saying it would strengthen a month ago. <\/p>\n
Panelists are sending strong signals that they see little threat of inflation. A net 30 percent expect global core inflation to rise over the coming year \u2013 down from a net 45 percent last month.<\/strong> Accordingly, the proportion of investors expecting short-term interest rates to rise has fallen to a net 14 percent from a net 32 percent in April. <\/p>\n
Investors have responded by reducing allocations to commodities and emerging markets and upping allocations to bonds.<\/strong> A net 29 percent of global asset allocators are underweight commodities \u2013 an increase from a net 11 percent in March and the lowest reading since December 2008. A net 17 percent of asset allocators remain underweight energy stocks. The proportion of global investors overweight emerging market equities has plummeted to a net 3 percent from a net 34 percent in March. A net 38 percent of the panel is underweight bonds, down from a net 50 percent in April.<\/p>\n
\u201cMay\u2019s Fund Manager Survey demonstrates a clear exit from China and assets connected to China \u2013 in the shape of commodities and emerging market equities. But it\u2019s worth noting that investors are keeping faith in global growth,\u201d said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research. \u201cWe see signs that Europe is the region investors are watching. They are increasingly aware of cheap valuations in European stocks, and concerns over sovereign risk in the region are dissipating,\u201d said John Bilton, European investment strategist. <\/p>\n
Signs of hope in eurozone equities<\/h2>\n
Fledgling signs of optimism towards Europe are emerging in May\u2019s global and regional surveys \u2013 although investors within the region also would like to see more policy action. Global investors are starting to see the eurozone as less of a problem and more of an opportunity. The percentage of the panel naming EU sovereigns and banks as number one \u201ctail risk\u201d has dropped to 29 percent from 42 percent.<\/p>\n
A net 38 percent of the global panel takes the view that eurozone equities are undervalued \u2013 a significant increase from a net 23 percent in April. With more investors viewing the U.S. as overvalued, the \u201cvaluation gap\u201d between the U.S. and the eurozone has widened even further in the past month.<\/p><\/blockquote>\n
European respondents to the regional survey are more positive about growth than a month ago. A net 24 percent of European fund managers believe Europe\u2019s economy will strengthen in the coming year, up from a net 19 percent in April. A net 17 percent see earnings improving in the next 12 months, up from a net 14 percent. At the same time, a net 31 percent of regional investors say that fiscal policy is too restrictive, up from a net 19 percent last month. <\/p>\n
Japan equities allocation reaches six-year high<\/h2>\n
Belief in the bull run in Japanese equities remains strong. Allocations to Japanese equities are at their highest since May 2006 with a net 31 percent of global asset allocators overweight Japanese equities. That is up sharply from a net 20 percent overweight in April. <\/p>\n
A net 44 percent of global investors say that the outlook for corporate profits is more favorable in Japan than in any other region \u2013 the most bullish outlook captured by the survey since November 2005.<\/p><\/blockquote>\n
Japan also remains the region that investors would most like to overweight over 12 months. A net 25 percent say Japan is at the top of their overweight list, in line with April\u2019s reading.<\/p>\n
Time to pay out or invest, say investors<\/h2>\n
With the prospect of corporate profits rising, investors are pressing the case for companies to pay out some cash. A net 27 percent of the global panel says that payout ratios (including share buybacks and dividends) are too low, a rise of six percentage points month-on-month. A 38 percent say that their preferred use of cash flow would be to return cash to shareholders via buybacks, dividends or acquisitions, up from a 34 percent in April. A 47 percent would like companies to increase capital spending, up 1 percent month-on-month, while only 9 percent are prioritizing debt repayment.<\/p>\n","protected":false},"excerpt":{"rendered":"
BofA Merrill Lynch Fund Manager Survey Finds Investors Positioning For China Slowdown and Low Inflation…<\/p>\n","protected":false},"author":20,"featured_media":28631,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1483],"tags":[1663,1809,1743,1655,1856,1858,1859,2073,1950,1671,1744,1681,1651,1724,1999],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/28633"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=28633"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/28633\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/28631"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=28633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=28633"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=28633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}