Wednesday, May 18, 2011
Gulf News
Dubai Investors’ confidence in the outlook for global growth and corporate profits has dipped, according to the latest survey of fund managers by Bank of America Merrill Lynch.
An overall total 284 fund managers with $814 billion of assets under management participated in the survey from May 6 to 12.
The proportion of the panel believing that the world economy will strengthen in the next 12 months has fallen to a net 10 per cent, down from a net 27 per cent in April and a net 58 per cent as recently as February.
Similarly, only a net 9 per cent of respondents now look for corporate profits to improve in the coming year.
“A triple dip in growth expectations is reshaping investors’ stance on risk,” said Michael Hartnett, chief Global Equity strategist at BofA Merrill Lynch Global Research.
Participants’ lower conviction is most evident in Europe, where expectations turned negative in May with a net 8 per cent expecting the region’s economy to weaken in the next year. Just two months ago, a net 32 per cent forecast that it would strengthen. This reflects investors’ identification of the Eurozone sovereign debt crisis as the largest tail risk globally.
However Merrill Lynch analysts said the risk perception on European crisis is blown out of proportion as recent GDP figures suggest a strong recovery is in the making.
Pessimism overdone
“A risk for investors is that pessimism on Europe now looks to be overdone, particularly in light of strong recent GDP data,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research.
With prospects for growth more challenging and inflation fears receding, asset allocators have postponed their expectations of a rise in US interest rates.
In the April survey, 69 per cent of participants anticipated the Federal Reserve first hiking rates by the end of this year; now 73 per cent sees this occurring in 2012.
With a significant proportion of fund managers taking a negative view of global growth, equity markets across the world are likely to face lower fund allocation.
In the Middle East and North Africa region investor confidence is at a historic low due to the political turmoil in the region.
According to a recent fund manager survey by MEED Insight in the Mena region, regional investors are cautiously optimistic on the investment outlook within the region.
“The geography where investors and fund companies are focusing their investment influenced their 2011 outlook to a large extent. Generally, companies that are focusing their activities towards Abu Dhabi, Qatar,
Kuwait and Saudi Arabia tend to have “the same” or “better” forecast for their business in 2011,” said the MEED Insight survey.
By Babu Das Augustine?Deputy Business Editor
Gulf News 2011. All rights reserved.
