Bullish trend signals global markets rebound in a year

Bullish trend signals global markets rebound in a year
The Financial Express, May 21, 2009, Page 3

fe Bureau, Mumbai

The strong bullish sentiment being created in India post the elections is not restricted to India alone and for that matter restricted to India only. Fund managers had already factored in the positive changes and had begun allocating accordingly. Bullishness in global markets has reached new heights with seven out of 10 investors who predict the world economy will improve in the next 12 months, according to the Merrill Lynch Survey of Fund Managers for May.

Supported by positive expectations on corporate profits, portfolio managers are backing their optimism with action by putting their money to work, said the survey. Average cash holdings have fallen to 4.3% from 4.9% of allocations in April it adds. Equities, while underweight, are more popular, especially cyclical sectors that are expected to perform best in a recovery. Investors have moved to a net underweight position in bonds for the first time since last August. Many are rushing to emerging markets as investor optimism on China’s economy is higher than at any point in the past six years.

“Investors are finally opening their wallets and reducing cash balances to mid-cycle levels to buy equities, cyclical stocks and risky assets,” said Michael Hartnett, Banc of America Securities-Merrill Lynch co-head of international investment strategy.

“However, this rush to take on risk, especially in emerging markets, is reminiscent of bubble-like behavior. A record net 40% of fund managers are looking to overweight the region in the next 12 months.” “Having addressed their most urgent priority by returning to financial stocks, this month investors have added exposure to cyclical, real economy stocks and further purged defensive overweight positions,”said Gary Baker, Banc of America Securities-Merrill Lynch co-head of international investment strategy.

Nowhere has the reversal in economic outlook been more pronounced than in Europe. A net 35% of respondents to the Regional Fund Manager Survey expect Europe’s economy to improve in the coming year. That’s in sharp contrast to April when a net 26% forecasted further deterioration.

A total of 220 fund managers, managing a total of $617 billion, participated in the global survey from 8 May to 14 May. A total of 182 managers, managing $355 billion, participated in the regional surveys.

The survey was conducted by Banc of America Securities–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 organisations. It is ranked as the fourth-largest market information group in the world.