Investor sentiment worldwide has surged to its highest level in almost four years on rising confidence in Europe.
The Bank of America Merrill Lynch (BofAML) Fund Manager Survey for August shows a net 72 percent of respondents predict world economic growth will accelerate over the next 12 months, the highest percentage since 2009. This is based on investors’ perception that the eurozone will overcome the worst of its troubles and China will undergo a soft landing. Sentiment posted a sharp gain from July, when a net 52 percent of respondents predicted a pickup in growth.
‘Sentiment toward the eurozone has improved notably,’ say the study authors. ‘No less than 88 percent of European fund managers now anticipate the region strengthening in the year ahead, twice the level recorded last month. Respondents increasingly view stronger growth as the likeliest solution to the eurozone debt crisis, rather than interventions by the European Central Bank.’
A net 17 percent of investors surveyed say they are overweight Europe – or devote a higher share of investments to Europe than to other regions – an increase from only 3 percent last month. Investors also indicate sentiment for Europe would increase further if the region were to implement a European banking zone.
‘The current earnings season shows global recovery reflected in European companies’ performance,’ says John Bilton, BofAML European investment strategist, in a press release. ‘With the eurozone the most undervalued major market by far, optimism on the region’s equities should be sustained.’
Investors’ main concern remains the Chinese economy, but fears of a hard landing that would slow global economic growth are easing as investors increasingly predict a gradual easing. In August, a net 32 percent of investors have a negative outlook for the Chinese economy, compared with 65 percent in July.
Sentiment has deteriorated, however, for emerging markets in August. A net 19 percent of respondents say they are underweight global emerging markets stocks, the lowest level in two years.
In total, 229 fund managers with $671 bn in assets under management took part in the global survey from August 2 to August 8.
