Equity allocations stay high but bias shifts to defensivesAllocations towards equities have held at the highs reached in January. A net 51 percent of asset allocators remain overweight global equities. Within equities, sectoral allocations highlight a bias towards a measured easing of risk appetite with a shift towards defensive assets. Pharmaceuticals, a traditional defensive sector, has returned to the number one sectoral pick for global investors, having been third in the pecking order a month ago. The proportion of investors overweight the sector rose to 27 percent from 11 percent in January. Cyclical sectors become less popular. The biggest month-on-month faller was Technology, which saw a negative 12 percentage point swing in the number of investors overweight the sector. Materials also suffered a double-digit fall in the percentage of overweights. The number of respondents overweight Technology, Industrials and Energy also fell. Sentiment towards Japanese equities normalizes Japanese equities continue to benefit from a positive shift in sentiment by global investors. A net 7 percent of asset allocators say they are overweight Japanese equities this month, up from a net 3 percent in February. In December, a net 20 percent were underweight Japanese equities. Local sentiment and risk appetite appears strong. A net 29 percent of Japanese investors responding to the Regional Fund Manager Survey say they are underweight cash, up from a net 5 percent one month ago. Automotives, Technology and Banks are the three most popular sectors domestically. Global investors have indicated that their positive view towards Japan will continue. A net 21 percent of the panel says that the outlook for corporate profits in Japan is more favorable than for anywhere else, up from a net 4 percent in January. Accordingly, a net 9 percent says that Japan is the region they would most like to overweight. Two months ago, a net 17 percent said Japan was the region they most wanted to underweight.
This positive outlook comes at a time when investors see the yen as weakening, despite the fact that the currency is close to fair value based on the IMF's definition of currency valuation. Four out of ten respondents to the global survey say that USDJPY rising to 100 is likely to happen before a U.S. debt downgrade, a Spanish bailout or gold breaking through $2,000 per ounce.Fund Manager SurveyAn overall total of 251 panelists with US$691 billion of assets under management participated in the survey from 1 February to 7 February. A total of 194 managers, managing US$555 billion, participated in the global survey. A total of 130 managers, managing US$270 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world. BofA Merrill Lynch Global ResearchThe BofA Merrill Lynch Global Research franchise covers nearly 3,500 stocks and 1,100 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named Top Global Research Firm of 2012 by Institutional Investor magazine; No. 1 in the 2012 Institutional Investor All-Asia survey for the second consecutive year; No. 2 in the 2012 Institutional Investor All-China, All-Europe, All-Japan and All-Latin America surveys; and No. 3 in the 2012 Institutional Investor All-America survey. The group was also named No. 2 in the 2012 Institutional Investor All-America Fixed Income survey and in the 2012 Emerging Markets Equity and Fixed Income survey, covering Emerging Europe, Middle East and Africa. Additionally, BofA Merrill Lynch Global Research was named the No. 1 Global Broker by Financial Times/StarMine, as well as ranked No. 1 in the U.S. and Europe and No. 2 in Asia. The group was also named No. 1 in Asia and No. 2 in the U.S. in the Wall Street Journal Best on the Street 2012 Analysts Surveys. The group was also the winner of the Emerging Markets magazine’s EM Research Global Award for 2010 and 2011.
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