Worries build over Europe, China and Korea, but sentiment for Japan and US at highest level in seven years, finds fund manager survey
Global investor confidence declined in April as renewed concern over the European sovereign debt crisis and worries about Chinese economic growth more than made up for the distancing of the threat of a US fiscal crisis, according to the latest monthly fund manager survey from Bank of America Merrill Lynch (BofAML).
A net 49 percent of investors surveyed expect the global economy to strengthen in the coming 12 months, down from a net 61 percent in March, the survey shows. The drop in confidence is led mainly by an increasingly negative view of the prospects of emerging markets and the eurozone. At the same time, investor sentiment toward the US and Japan has improved.
‘While the threat of a US fiscal crisis has largely receded, anxiety over the eurozone and new risks – particularly the potential for conflict in Korea – has intensified. A ‘hard landing’ in China also remains a concern,’ notes BofAML in a press statement. On the other hand, ‘fund managers show sharper regional preferences than they have in past surveys. They are increasingly positive toward the US and Japan, where 12-month views have reached their most bullish in seven years.’
Amid declining confidence in eurozone growth, global investors in April moved to a net underweight position in European assets of 8 percent, from a net overweight of 4 percent in March, according to BofAML. At the same time, a net 19 percent of regional investors in Europe expect the region to strengthen this year, compared with the net 40 percent recorded in March.
Investor sentiment toward China’s outlook has also deteriorated, with a net 13 percent of investors in Asia saying they expect the economy to strengthen in the coming 12 months. That figure was as high as 71 percent in January. Meanwhile, confidence in Japan has increased sharply, with all survey respondents saying they expect the country’s economy to strengthen over the next year.
Investor appetite for the US dollar remains at the all-time high set in March, with a net 72 percent of investors predicting the dollar will strengthen in the coming 12 months. Appetite for the yen, however, has weakened to the lowest level in more than 10 years as the central bank launched a stimulus plan to reignite inflation, weakening the currency.
‘Abenomics signals that Japanese policy makers are joining the fight against deflation,’ says Michael Hartnett, chief investment strategist at BofAML Global Research, in a press statement. ‘This reinforces our expectation of a Great Rotation into equities from fixed income.’
The survey of 252 market professionals with a combined total of $725 bn in assets under management was taken between April 5 and April 11.
