Bofa Merrill Lynch survey expresses confidence in China’s economy
Confidence in the outlook for China’s economy has surged to a three-year high, underpinning broader optimism about the global economy and equity markets, according to the BofA Merrill Lynch Fund Manager Survey for November.
A net 51 percent of investors polled in across Asia Pacific, Global Emerging Markets and Japan believe that China’s economy will strengthen in the coming year, the highest reading since July 2009. The monthly upswing of 46 percentage points, from a net 5 percent in October, represents the largest single-month increase since February 2009.
The survey suggests that optimism in the global economy is outweighing fears surrounding the U.S. fiscal cliff. A net 34 percent of the panel believes the world economy will strengthen in the next 12 months, the highest level since February 2011 and a monthly rise of 14 percentage points. A growing number of investors view the U.S. fiscal cliff as the biggest tail risk – 54 percent of the panel this month, up from 42 percent in October.
Corporate profit expectations rose significantly for the second successive month. A net 4 percent of investors believe the outlook for profits will improve in the coming 12 months. This compares with net 28 percent predicting a worsening in corporate profits two months ago. Equity allocations are rising, and 42 percent of the panel says they will opt to sell government bonds to make way for higher beta equities, up from 37 percent in October. Reducing cash levels is the second preference.
November’s survey suggests that the great rotation out of bonds into equities could be underway. Asset allocators have, for the fifth successive month, increased allocation to equities while reducing bond positions. A net 35 percent are overweight equities, compared with a net 25 percent in October. A net 35 percent of asset allocators are underweight bonds, up from a net 26 percent a month ago. More investors are expecting higher interest rates as inflation expectations inch upwards.