Finance

Finance

Merrill Lynch: Investor optimism soars to highest in 6 years

20 August 2009 15:04 (UTC +04:00)

Bakuâ€“ APA-Economics. Investor optimism about the global economy has soared to its highest level in nearly six years, with portfolio managers putting their cash back into equity markets, according to a survey of fund managers by Merrill Lynch.
According to the survey, conducted for August, 75 percent of respondents think the world economy will strengthen in the coming 12 months, the highest reading since November 2003 and up from 63 percent in July.
Confidence about corporate health is at its highest since January 2004, with 70 percent of respondents expecting global corporate profits to rise in the coming year, up from 51 percent last month, Bizjournals reported.
Investors apparently are matching their sentiments with action: Average cash balances have fallen to 3.5 percent from 4.7 percent in July, their lowest level since July 2007. Equity allocations rose from July, with a net 34 percent of respondents overweight the asset class, up from a net 7 percent in July.
Merrill Lynch said its Risk and Liquidity Indicator, a measure of risk appetite, rose to 41, the highest in two years.
Merrill Lynch said global emerging markets, led by China, and technology stocks are the strongest engines behind the early recovery. Thirty-three percent of respondents said they prefer to overweight emerging markets, but investor consensus is to remain underweight the United States, the European Union, the United Kingdom and Japan.
Technology remains the top sector, with 28 percent of the global panel overweight the industry. Industrials and materials lag, with global fund managers holding 11 percent and 12 percent overweight positions, respectively.
Banks are further behind. Global fund managers remain concerned about the sector, holding a 10 percent underweight position. In contrast, investors within emerging markets are positive about banks, with a net 17 percent of fund managers in the regional survey overweight bank stocks.
The net percentage expecting earnings per share to rise nearly tripled, reaching 62 compared with a net 23 percent a month ago. Investors in the region took an overweight position in basic resources, a cyclical sector, and radically scaled back their overweight position in pharmaceuticals, a defensive sector.
A total of 204 fund managers, managing a total of $554 billion, participated in the global survey; 177 managers, managing $370 billion, participated in the regional surveys.