Investors moving toward a "risk-off" position.
BANKING AND CREDIT NEWS-March 20, 2014--Investors moving toward a "risk-off" position
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20 March 2014 - Global investors are moving toward a "risk-off" stance taking on greater protection as the prospect of geopolitical instability grows according to the BofA Merrill Lynch (NYSE: BAC) Fund Manager Survey for March.
Responding at a point of growing tension in Ukraine, 81% of investors said they see geopolitical risk posing a threat to financial markets stability more than four times the reading one month ago.
Twenty-seven percent of investors say that a geopolitical crisis is the biggest tail risk up from 12% in February.
At the same time, investors continue to express concern about the prospects for emerging markets with sentiment towards China's economy falling further.
Investors have reacted by showing reduced optimism about the prospect for corporate profits globally and by reining in risk. They have increased cash allocations, reduced equity holdings and taken on greater protection.
The proportion of investors taking lower than average risk in their portfolio has increased to a net 14% from a net 2% in February. A net 16% of global asset allocators say that they are overweight cash, up from a net 12% last month.
Average cash balances remain high at 4.8% of portfolios. The proportion of asset allocators overweight equities has dropped by nine percentage points month-on-month to a net 36%.
Demand for protection against sharp falls in equity markets has increased to its highest level in 22 months, the firm said.
Investors have scaled back their belief in a vibrant recovery in corporate profit growth but remain positive. A net 40% of global investors believe that global profits will improve in the coming 12 months, down from a net 45% in February.
A net 12% say that it's unlikely corporate profits will rise by 10% or more in the year ahead, up from 4% of the panel taking that view in February.
At the same time, investor demand for companies to borrow and invest has eased. A net 34 % of respondents say that corporate balance sheets are underleveraged, down from a net 40 % last month. A net 63 % believe that companies are underinvesting, down from last month's high of a net 67%.
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