Global investors are still positive on equity markets overall, but they have curbed some of their early exuberance, according to the BofA Merrill Lynch Fund Manager Survey for April.
The firm reports that a net 49% of survey respondents now expect the global economy to strengthen in the next 12 months, which is down 12 percentage points from March. “While the threat of a U.S. fiscal crisis has largely receded, anxiety over the eurozone and new risks – particularly the potential for conflict in Korea – has intensified,” it says, adding that the prospect of a ‘hard landing’ in China also remains a concern. This more cautious stance is reflected in cash holdings, which are now at their highest level in the past six months.
Fund managers are also showing sharper regional preferences, it notes. It says investors are increasingly positive towards the U.S. and Japan, and the appetite for exposure to the U.S. dollar remains at its highest level in the survey’s history. At the same time, investors have become more negative on both emerging markets and the eurozone, it says.
The survey also continues to highlight fund managers’ call for companies to put their large cash hoards to work, or to return it to their owners. It reports that 48% would most like to see excess corporate cash flow directed to higher capital spending, 34% want surplus funds distributed back to them through buy-backs or dividends, with only 11% viewing the reinforcement of balance sheets as a priority.
Investors are also skeptical of the prospect for significant global earnings growth, it notes; and, expectations of corporate margin performance have weakened.
A total of 252 panelists with US$725 billion of assets under management participated in the survey from April 5 to 11.