Growth might return in 2010.

Byline: Times News Service

MUSCAT [R]e-eIN Investors remain optimistic that the global economy is moving out of recession and portfolio managers are reassessing their positions to gradually embrace the current global economic recovery, says the Merrill Lynch survey of fund managers for September.

A net 72 per cent of the panel expects the world economy to strengthen over the coming year. The same proportion also sees [R]e-xbelow trend growth and below trend inflation[R]e-EN over the next 12 months.

Cash levels increased with average cash balances rising to 4.1 per cent of total assets, compared with 3.7 per cent in August, which had been the lowest level since July 2007. The net number of asset allocators bullish on cash increased to 10 per cent from three per cent one month earlier. Investors lowered their allocations to eight out of 11 industry sectors. [R]e-xSeptember[R]e-es jump in cash levels and lower equity exposure shows that investors[R]e-e risk appetite lags their confidence in the recovery,[R]e-EN said Gary Baker, head of European equity strategy at Banc of America Securities-Merrill Lynch Research.

[R]e-xThe consensus expects a global recovery but expects it to be below trend and not inflationary,[R]e-EN said Michael Hartnett, chief global equities strategist at Banc of America Securities-Merrill Lynch Research.

The survey suggests that asset allocators are most confident on Europe in 18 months.

Just a net one per cent of respondents to September[R]e-es global survey is bearish on the eurozone, down from 13 per cent in August. It[R]e-es the most positive stance on the region since February 2008 when asset allocators held a slightly bullish position.This return to neutrality represents a large swing opinion from the lows of March when 40 per cent of the panel was bearish on the eurozone. Increased enthusiasm for Europe, however, has yet to extend to the UK. This month a net 10 per cent of asset allocators were bearish on UK equities, only a marginal improvement from 13 per cent in August.

A net seven per cent of respondents said they intend to take overweight positions in eurozone equities over the next 12-months. [R]e-xEurope[R]e-es comeback in popularity underscores how investors no longer see emerging markets as the only global growth story. Investors now have a broader regional and sector strategy,[R]e-EN said Hartnett.Fund managers within Europe bucked the global trend by reducing cash levels. A net 21 per cent of respondents were bullish on cash, down from 29 per cent in August. The average cash balance fell to 3.0 per cent from 3.7 per cent the previous month.The survey shows that investors in Europe are showing a shortage of confidence and conviction in deciding which sectors to be bullish on. Technology and Telecoms are the sectors in which the regional panel has retained bullish positions in September.

In contrast, investors appear to be acting with conviction when deciding on their bearish positions. Investors hold high conviction in underweighting four sectors. The highest underweight score (net [R]e-eIu41 per cent for personal and household) is in line with the long-run average for the most unloved sector. [R]e-xThe low level overweight readings this month shows a lack of sector consensus among European fund managers and leaving our measure of sector conviction at its fourth-lowest level in survey history and at its lowest since late 2004,[R]e-EN said Patrik Sch[R]E[acute accent]witz, European equity strategist at Banc of America Securities-Merrill Lynch.

E Muscat Press and Publishing House SAOC 2009

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