Rising conviction about European equitiesEurope has been able to avoid the downward shift in global sentiment with equity allocations reaching a six-year high. A net 46 percent of asset allocators are overweight European equities, up from a net 36 percent September and representing the highest reading since 2007. Global investors’ outlook for European corporate profits has continued to rise uninterrupted by events in Washington. It is now at its most positive level since September 2007. A net 10 percent of the panel says the eurozone is the region with the most favorable outlook, up from two months ago when a net 5 percent forecast falling profits. Positivity towards corporate Europe is also evident within the region. In August, a net 55 percent of European respondents to the regional survey said double-digit growth was unlikely in the following year. This month, a net 6 percent says that double-digit earnings growth is likely – a two-month swing of 61 net percentage points. Japanese equities have also resisted the global trend in October to record a second successive month of improvement. A net 30 percent of global asset allocators are overweight the region, up from a net 22 percent in September. Emerging market confidence starts to rebuild Investors and asset allocators have increased allocations towards global emerging market equities and have indicated in October’s survey that they see value in the region. The signals towards global emerging markets are not universally positive, however. Asset allocators scaled back their underweight positions. A net 10 percent of the panel was underweight emerging markets equities in October, improved from a net 18 percent underweight a month ago. On average, a net 26 percent of investors have been overweight the region. A net 38 percent of the global respondents say that emerging markets equities are the most undervalued of all the regions – in contrast, a net 63 percent says the U.S. is the most overvalued region. The amount of investors naming emerging markets as the region they most want to underweight continued to fall.
At the same time, however, the outlook for China’s economy worsened. A net 5 percent of regional fund managers expect the Chinese economy to strengthen in the coming year, down from a net 28 percent in September. And asset allocators further reduced their exposure to commodities – an important proxy for emerging market sentiment. A net 28 percent of asset allocators are underweight commodities, compared with a net 16 percent in September.Survey of Fund ManagersAn overall total of 183 panelists with US$643 billion of assets under management participated in the survey from October 4 to October 10, 2013. A total of 183 managers, managing US$500 billion, participated in the global survey. A total of 118 managers, managing US$291 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 over 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 2013 Institutional Investor All-Asia survey for the third consecutive year; No. 1 in the Institutional Investor 2013 Emerging Market & Fixed Income Survey; No. 2 in the 2013 Institutional Investor All-America survey; No. 2 in the All-Japan survey for the second consecutive year; No. 2 in the 2013 All-Latin America survey; No. 2 in the 2012 All-China survey; and No. 3 in the 2013 Institutional Investor All-Europe survey. The group was also named No. 2 in the 2013 Institutional Investor All-America Fixed Income survey for the second consecutive year; and No. 3 in the 2013 All-Europe Fixed Income Research survey.
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