Investor attitude towards Japan has picked up this month with a net 21 per cent now overweight on the country’s equities compared to just 7 per cent in May, according to the Bank of America Merrill Lynch fund manager survey for June.

Investor attitude towards Japan has picked up this month resulting in a net 21 per cent of fund managers now overweight on the country’s equities compared to just 7 per cent in May, according to the Bank of America Merrill Lynch fund manager survey for June.

The change comes after Japan revised its initial first quarter growth from 5.9 per cent to 6.7 per cent - the fastest pace of growth since July-September 2011. While in May, Japanese consumer confidence rose for the first time in six months despite an increase in consumer sales tax from 8 per cent to 5 per cent in April.

Regional fund managers in particular have turned more positive with a net 73 per cent expecting the country’s economy to strengthen over the next 12 months - a 20 percentage point rise in the space of two months.

Overall, the Bank of America Merrill Lynch survey found that global investor sentiment was positive, although there were concerns at the rapid pace of growth. As a result, a net 78 per cent of fund managers now anticipate below-trend growth over the next 12 months.  

Equities remain the asset class of choice, so much so that 15 per cent of fund managers now regard the class as over-valued - a position not seen since 2000.

Meanwhile, bonds remain out of favour - currently regarded as over-valued by a net 75 per cent of fund managers- their highest level since the end of 2013.

Regionally, China has caused the most worry for investors with 36 per cent of fund managers saying they are now worried about the prospect of debt defaults. Europe has also been a cause for concern given that quantitative easing by the European Central Bank no longer looks imminent. A net 6 percent of regional fund managers now regard European equities as over-valued – the highest proportion since 2000.