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UK investors bet on buoyant stock market

Friday, February 28 14:17:03

British investors increased their exposure to euro zone and other developed equity markets in February and slashed their holdings of bonds and volatile emerging market assets, a Reuters poll showed.

A monthly poll of 11 UK-based investment managers released on Friday showed global bond holdings dropped to 22.8 percent from 24.2 percent in January, for the lowest level since at least May 2012.

While investors pared back their overall stock holdings slightly, to 54.5 percent from 55.1 percent, they were confident that developed markets would remain buoyant, with sentiment on equities at the highest since at least May 2012.

"Monetary policy conditions in developed economies, combined with support from corporate earnings and record global dividend payouts, should continue to justify a good commitment to equity markets this year," said Mark Robinson, chief investment officer at Berry Asset Management.

Although European stock markets had a patchy start to the year, investors remain confident that a recent recovery will be sustained and raised their holdings in euro zone equities slightly to 15.9 percent, the highest level since June 2012.

The poll, conducted between Feb. 12-25, showed North American stock holdings at a six-month high of 32.8 percent.

"Global stock markets appear to have regained some composure after their shaky start to the year, with investors seemingly becoming more accustomed to Fed tapering and less worried about China's economic activity," Robinson said, referring to the U.S. central bank's gradual trimming of its monetary stimulus programme.

Across emerging economies, however, investors slashed equity holdings as they took fright at political instability in countries such as Ukraine, Venezuela and Thailand.

Holdings in Asian equities excluding Japan dropped to 8.6 percent, the lowest level since at least May 2012, while emerging European equity holdings were halved to 1 percent and investment in Latin American stocks fell to 0.7 percent, the lowest level since April.

"We believe the case for emerging market currencies and equities is not compelling yet as the momentum of growth expectations remains negative," said Chris Paine, director of asset allocation at Henderson Global Investors.

"Tapering in the U.S. may continue to undermine carry trades," Paine added, referring to the process of borrowing cheap U.S. dollars and investing in higher-yielding emerging market currencies and bonds. (Reuters)