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Global investors load up on shares

Thursday, July 31 15:04:05

Global investors bought more stocks in July than at any point in more than two years, spearheaded by a push into Europe and growing confidence in the continent's economic recovery, a Reuters poll showed today.

Faith in the global recovery and relatively accommodative policies from major central banks broadly eclipsed rising geopolitical concerns surrounding Russia, Ukraine and the Middle East, although U.S. investors were particularly cautious.

The monthly poll of 49 fund managers and chief investment officers in the United States, Britain, Europe and Japan showed the average recommended exposure to equities in global balanced portfolios rose to 52.5 percent from 51 percent in June.

That was the highest since March 2012. The last time investors were more bullish on stocks was March 2011, when their allocation was 52.6 percent.

The rise in equity holdings came at the expense of bond holdings, which slipped to 35.2 percent from 35.6 percent, marking the smallest exposure to fixed income since April 2012.

Allocations to cash and property eased slightly to 5.6 percent and 2.0 percent, respectively. Exposure to alternative investments such as hedge funds fell to 4.8 percent, its lowest since at least February 2010.

Within global equities portfolios, the average allocation to Britain rose half a percentage point to 12.4 percent, the highest since at least February 2010. Holdings of euro zone stocks jumped more than a full percentage point to 18.9 percent from 17.8 percent in June.

Britain and the euro zone are at different stages of the economic cycle but both are attracting equity inflows.

Britain is one of the fastest-growing developed economies in the world and interest rates could rise later this year. The European Central Bank is nowhere near tightening policy as it battles low inflation and seeks to ensure the recovery.

North American stock weightings fell more than a percentage point to 41.0 percent from 42.1 percent, as the record highs on Wall Street recently tempted some fund managers to scale back their bets on further gains.

"While global equity markets have moved higher mainly on expanding multiples, rather than strong earnings, this is not currently giving out a warning signal," said Steven Steyaert, a portfolio specialist at ING Investment Management.

The U.S. S and P 500 .SPX hit a record high on July 24 and many observers interpreted this week's Federal Reserve policy statement as a sign the central bank is inching closer to raising interest rates.

Against that backdrop, U.S. fund managers were extremely cautious, the poll showed. They put almost 5 percent of their investments in cash, the highest since the U.S. sub-prime crisis began heating up in January 2008.

European fund managers were notably bullish, making their highest allocation to equities since January 2011, while cutting bond positions that are well below long-term averages.

British investment managers pared back their holdings of government debt in July and pumped more money into stocks before the expected rise in some interest rates, notably by the UK and U.S. central banks.

Japanese fund managers increased both stocks and bonds in their model portfolio allocations in July, as they bet on a steady recovery in the global economy even as the U.S. Fed keeps gradually reducing stimulus. (Reuters)

For more, visit www.businessworld.ie