Surveys
Record Number Of Fund Managers See US Growth Amidst China Doubts

A record number of investors believe in the US dollar, as fund managers around the world have growing confidence in the global economy despite doubts about China’s own, according to the July BofA Merrill Lynch Fund Manager Survey.
More than half of respondents now expect the global economy to strengthen over the next year, thanks to their conviction that developed economies, like the US and Japan, will achieve growth. This is especially clear after 83 per cent of the fund managers said they favour the dollar over other currencies, the highest reading yet recorded by the survey. Furthermore, a majority of asset allocators have invested in the US and Japanese equity markets, and are now overweight equities, up nine points in two months to 52 per cent.
In this respect, Japan stands out in the survey, with investors deeming that the country has the best outlook for corporate profits of any region. This is based on the fund managers’ expectation that Japanese companies will achieve double-digit earnings growth over the next year.
Against this background, appetite for Japanese equities has risen sharply, as July’s net 27 per cent overweight is up 10 points from last month, the biggest rise of any major market.
“With the support of a host of buy signals in recent weeks, the ‘Great Rotation’ is in full force. Our positive view of equities would be further reinforced if the loss of faith in China’s growth story turns out to be overdone,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
However, sentiment towards China has continued to worsen, as more and more fund managers doubt that the "dragon economy" can continue its growth. With a net 65 per cent of regional panellists believing that the country’s economy will weaken in the next year, everyone is prepared for a hard landing as a major tail risk. In comparison, just as many respondents believed in an improving Chinese GDP when the survey was conducted in December 2012.
Six months later, the view on Chinese investments has changed considerably, as 56 per cent see a Chinese commodities collapse as the biggest concern, by far overtaking the EU sovereign crisis as a risk.
Similarly, investors are taking a broader stance on global emerging markets, with 44 per cent saying that GEM countries offer the worst outlook for corporate earnings of any region – the most negative level ever recorded in the BofA survey.
An overall total of 238 panellists with $643 billion assets under management participated in the BofA Merrill Lynch Fund Manager Survey, which is conducted once every month.