Investors raise stock holdings despite sharp tech sell-off
MAJORITY SEE RECENT SETBACK IN TECH STOCKS AS A TEMPORARY PHENOMENON
Global investors raised their equity holdings in April, highlighting supportive company earnings and solid economic growth, with a majority taking the view that the recent sell off in tech stocks was just a temporary setback.
Reuters’ monthly asset allocation poll of 51 wealth managers and chief investment officers in Europe, the US, Britain and Japan was carried out from April 13 to 30.
During this period, global economic data broadly disappointed while tech shares suffered a sharp sell-off on worries about greater regulatory scrutiny, and a slowdown in smartphone demand.
However, some 72 per cent of poll participants who answered a question on the leading tech stocks said the recent pullback was temporary, with Andrew Milligan, head of global strategy at Aberdeen Standard Investments, expecting an extended business cycle to at least 2020.
US tech shares still ended April in the black.
Justin Onuekwusi, a fund manager at Legal and General Investment Management, added that while “techlash” regulation was one of the risks on his radar, there was little evidence so far of draconian measures that would constrain growth prospects.
Overconfidence
In fact, he said the correction had reduced one of his other main concerns about tech: investor overconfidence.
The poll showed investors adding to overall equity exposure after a dip in March, with global equities up at 48.4 per cent.
They also raised their US stocks allocation slightly to 38.2 per cent, while Eurozone equity allocations rose to 20.3 per cent, the highest since September 2017.
Larry Hatheway, group head of investment solutions at GAM, took a slightly larger allocation to equities, saying the firstquarter earnings season was likely to be supportive.
Towards the end of April, this was borne out by stellar earnings from the likes of Amazon and Samsung Electronics.
And despite the recent muted growth figures from Europe, managers also retained an upbeat outlook on the global economy.
“We maintain a pro-growth strategy favouring equities over bonds, supported by a global synchronised economy and only a moderate pick up in inflation,” said John Husselbee, head of multi-asset at Liontrust.
The European Central Bank’s meeting on April 26 was seen as being on the dovish side as the bank gave few clues about its approaching decision on ending its bond purchases.
Investors trimmed allocations to emerging markets, with stocks cut to 13.5 per cent from 14.3 per cent and debt cut to 10.4 per cent from 11.7 per cent.
Exposure reduced
Cedric Baron, head of multiasset at Generali Investments, said they had tactically reduced exposure to emerging markets, which could suffer from shortterm dollar appreciation. The dollar hit 3-1/2 month highs in April.
Russian assets sold off sharply in early April after the US imposed fresh sanctions on Russian businessmen and their companies. But some 80 per cent of poll participants who answered a question on sanctions risk said they were not removing all Russian assets from their portfolios. Partly this was because some did not have direct Russian exposure, or because they already had an underweight or zero exposure to Russian markets. “The market always looks seductively cheap but the political risks are just too high,” said Rob Pemberton, investment director at HFM Columbus.
But others, such as Raphael Gallardo, a strategist at Natixis Asset Management, argued there were tactical opportunities in the rouble which looked “structurally undervalued”.
We maintain a pro-growth strategy favouring equities over bonds, supported by a global synchronised economy and only a moderate pick up in inflation.” John Husselbee | Head of multi-asset at Liontrust