Fund man­ager sur­vey giv­ing buy sig­nal: BofA Mer­rill

The Pak Banker - - MARKETS/SPORTS -

In­vestors are hold­ing the most cash since Novem­ber 2001, which should be in­ter­preted as an "un­am­bigu­ous buy" sig­nal, ac­cord­ing to Bank of Amer­ica Mer­rill Lynch in its Fe­bru­ary global fund man­agers sur­vey.

In a note to clients on Tues­day, the firm said its sur­vey showed cash at 5.6 per­cent. When the av­er­age cash bal­ance rises above 4.5 per­cent, a con­trar­ian buy sig­nal is gen­er­ated while a fall in the cash bal­ance below 3.5 per­cent gen­er­ates a con­trar­ian sell sig­nal.

The 1,800 level on the S&P .SPX is viewed as a floor which should hold and could en­tice in­vestors to buy and push stocks back up to the 1,950 level, which is seen as a ceil­ing ac­cord­ing to the sur­vey. How­ever, it does not in­di­cate a great en­try point for stocks as in­vestors in the past had gone "un­der­weight" on eq­ui­ties be­fore such points ma­te­ri­al­ized.

The sur­vey also shows in­vestors want cap­i­tal preser­va­tion, as ev­i­denced by the ro­ta­tion into cash, bonds and de­fen­sive stock sec­tors such as bonds and tele­coms, while re­duc­ing po­si­tions in the fi­nan­cial sec­tor and eq­ui­ties. In­vestors have re­set ex­pec­ta­tions for the macro and mar­ket en­vi­ron­ment lower, ac­cord­ing to the sur­vey, and now see re­ces­sion as a risk in­stead of a re­al­ity, with 16 per­cent of in­vestors now ex­pect­ing a weaker econ­omy over the next 12 months.

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