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BofA Merrill Lynch Fund Manager Survey Finds Investors Bullish On Global Growth As They Look Beyond Fiscal Cliff

Third successive month of rising sentiment towards corporate profits

The outlook for corporate performance has improved for the third successive month and more investors are calling for companies to raise capital expenditure. A net 11 percent of investors believe profits will improve in the coming 12 months – a 22-point swing from October when a net 11 percent were forecasting lower profits.

Pessimism about corporate margins has lessened for the third successive month. The proportion of investors predicting worsening margins has fallen to a net 27 percent, down from a net 33 percent a month ago and a net 44 percent in October. Similarly, December’s survey shows reduced skepticism over corporates’ ability to deliver double-digit profit growth. A net 37 percent believes global corporate earnings growth will be less than 10 percent, down from a net 52 percent in November.

A net 64 percent of the panel believes that companies around the world are under-investing, the highest reading in the history of the survey and an increase from a net 59 percent month-on-month. Investors are less worried about dividends and buybacks – the proportion saying that payouts are too low has fallen to net 28 percent from a net 34 percent.

Emerging market corporates have consolidated their position as the panel’s favorite. A net 38 percent of investors say that Global Emerging Market equities have the best outlook for corporate profits in the coming year, up from a net 32 percent in November.

Japan sentiment rises at home and globally

Global investors’ caution towards Japan has eased, while domestic optimism has strengthened. The proportion of global asset allocators underweight Japanese equities has fallen to a net 20 percent, down from a net 34 percent a month ago.

A net 17 percent of the global panel would like to underweight Japanese equities in the coming year, but that’s less than the net 30 percent taking that view in November. A net 90 percent of Japanese investors expect the economy to strengthen in the coming year, compared with a net 18 percent in November, while a net 81 percent is forecasting improved earnings in the coming 12 months.

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