Tuesday, September 17 16:34:27
Investor bullishness towards European equities has reached pre-crisis highs as markets digest the emerging market sell-off, according to the BofA Merrill Lynch Fund Manager Survey for September.
Allocations to eurozone equities have reached their highest level since May 2007. A net 36 percent of global asset allocators are overweight the region, more than twice the net 17 percent recorded in August. A net 12 percent of asset allocators are overweight U.K. equities, which represents an all-time high. Allocations to emerging market equities remain low with a net 18 percent of the panel underweight.
Investors have signaled their intent to maintain flows into Europe. A net 27 of investors say that the eurozone is the region they would most like to overweight in the coming 12 months - also the highest reading since May 2007. The switch in sentiment towards Europe has been swift. Only a net 2 percent expressed a desire to overweight the region in July. Greater confidence in Europe's economy is evident. Half of the panel believes that stronger EU growth is the most likely solution to the region's debt crisis - versus only 19 percent who believe that ECB-led stimulus is the key solution. In July, only 30 percent believed Europe could grow its economy out of crisis.
While optimism is returning to Europe, cash levels have risen to an average of 4.6 percent of portfolios. The proportion of asset allocators overweight cash has risen. Eight out of 10 investors believe the global economy will continue to grow at below trend rate in the coming 12 months.
"Investor cash levels remain high because the fear of bond markets is greater than the appetite in equity markets," said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research. "Belief in Europe's economy is robust and though eurozone equities have come back strongly, value remains the best on offer in developed world markets," said John Bilton, European investment strategist.