Funds shun Europe as recession looms

The world’s biggest fund managers are seeking respite from troubles in the eurozone by turning to US. and emerging market equities, according to the BofA Merrill Lynch Survey of Fund Managers for November.

Globally, investors have slightly increased their exposure to equities since October’s survey. A net 5% of the panel is underweight equities, down from a net 7% a month ago. The proportion of investors overweight U.S. equities rose sharply to a net 20% from a net 6% in October, the survey said.

Global emerging markets bounced back after a weak October. A net 27% percent of investors are overweight the region, up from a net 9% percent last month. The eurozone remains the least popular region, but the proportion of investors underweight eurozone equities ticked down just one percentage point to a net 30%.

Gloom within the eurozone has intensified. The proportion of Europeans forecasting regional recession has almost doubled. A net 72% of European respondents to the regional survey believe Europe will experience recession in the coming 12 months, up from a net 37% in October. Fears of a global recession have eased. A net 31% of investors expect the world economy to avoid a recession, up from a net 25% last month.

“Investors are showing belief in emerging market growth and U.S. resilience, which is key to retaining positive global sentiment,” said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Research. Gary Baker, head of European Equities strategy at BofA Merrill Lynch Research, added, “European growth concerns are more intense but sentiment looks to be close to rock bottom – unless Europe’s problems spread to the rest of the world.”

For a full analysis of the latest survey, read our weekly magazine, out on Friday.

AIR publishes a weekly magazine. Subscriptions are free at www.aireview.com.au