According to a survey conducted by BofA Merrill Lynch, 28% of investors expect the world economy to strengthen in the next 12 months. The massive rally in India since the start of the year has helped fund managers reduce their underweight position on India in March, the survey found out
Investors across the globe are increasingly bullish about prospects for growth and a diminishing number expect further rounds of quantitative easing (QE) by central banks, said BofA Merrill Lynch in its monthly survey of fund managers.
A net 28% of investors expect the world economy to strengthen in the coming 12 months—a large increase from a net 11% in February—the survey found out. However, investors foresee higher inflation with a net 13% expecting it to rise in the coming year.
“The prospect of higher inflation reflects a victory of central banks in the war against deflation. Risk appetite is rising with hedge funds more active, but cash is still on the sidelines to put to work,” said Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research.
The survey said while attention is shifting to developed economies from emerging markets, growth prospects in Europe, the US and Japan are overshadowing emerging markets where some investors are turning bearish. “Asia Pacific investors are still overweight (OW) on China, but allocations fell to a five-month low to +26%. Hong Kong is the next favourite at +18% OW and the Philippines saw the biggest month-on-month jump in weighting to +9% OW from -10% underweight (UW). However, allocations to both Korea and India fell to a net -10% UW from neutral last month. Australia is still the least loved country at -13% UW,” the report said.
According to the survey, China held onto to its favourite market status in March at +41% while Brazil at +35% and Russia at +24% also remained overweight. The massive rally in India since the start of the year has helped fund managers reduce their underweight to -6% this month.
Despite a $7 per barrel jump in Brent crude oil prices over the last four weeks, emerging market fund managers became more cautious on the energy sector—swinging from a +33% overweight to a -6% underweight. Similarly, materials fell back to an UW to -12% in March. Investors held on to their small OW positions in emerging markets financials and remained stubbornly bullish on consumer discretionary at +65%, the survey said.
The survey was conducted by BofA Merrill Lynch Research with the help of market research company TNS. An overall total of 278 panellists with $796 billion of assets under management and 212 managers, managing $639 billion participated in the survey.
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