This is according to the BofA Merrill Lynch Fund Manager Survey for October, which also showed that only a net 32 per cent of respondents expect the global economy to strengthen over the next 12 months.
“This is the lowest reading in two years. Monetary policy underlies this shift in sentiment. Only a net 18 per cent of fund managers now view policy as too stimulative, down 14 percentage points to the lowest level since August 2012 – just before the last quantitative easing initiative in the US,” the report said.
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“Respondents have lost their appetite for emerging markets and European equities. Both current positioning and intentions for the next 12 months have turned negative or neutral. Instead, they have regained faith in the US market and increased their preference for Japan.”
According to the global research report, the appetite for exposure to the East Asian island nation has increased further.
“A net 14 per cent of asset allocators would most like to overweight the country’s equities over the next year – a reading that is some 10 percentage points more bullish than that for any other major market. In contrast to other regions, Japanese fund managers’ inflation expectations are on the rise,” it said.
“A net 46 per cent expect consumer price to climb in the next year. Investors’ increasingly negative outlook for the yen contributes to these assessments. Global fund managers are now equally bearish on the Japanese currency and the euro.”
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The report added that panellists are also concerned over fiscal policy with a net 19 per cent of global fund managers now regarding fiscal policy as too restrictive.