Bofa Mer­rill Lynch sur­vey ex­presses con­fi­dence in China’s econ­omy

The Pak Banker - - Front Page -

NEW YORK

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.

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