LONDON, Aug 30: Global fund managers halted their retreat out of US equities but yanked money out of the euro zone against a backdrop of uncertainty about the worldwide economic outlook, a Reuters survey on Friday showed.
A poll of 44 institutions in Japan, Europe, the United States and Britain showed the recent trend of quitting US equities has come to a halt, possibly on hopes of a further cut to US interest rates and on the view that stocks may have reached a bottom.
However, economic data suggest the outlook is uncertain, managers said. Asset allocators in different regions moved investments in different directions, suggesting there is not a clear-cut view on where the global economy is headed.
We are in a transitional period...the recovery is more drawn out than what people had expected, said Arnim Holzer, investment strategist for the asset allocation team at Deutsche Asset Management.
Investors’ exposure to a region like Japan or Britain can alter simply because of market movements rather than an underlying shift in flows of money, analysts pointed out.
Between the July 29 and Thursday this week, the Dow Jones Industrials index rose by 3.7 per cent, closing on Thursday at 8,694 points. The Nikkei-225 index slipped to 9,620, down 5.8 per cent, closing at 9,620. The FTSE Eurotop 300 index gained 0.75 per cent, closing at 946.24.
Economic data out of the US has thrown out conflicting signals. Earlier this week figures showed American factories enjoyed the biggest rise in orders for durable goods in nine months in July, but consumer confidence sank in August.
US fund managers played it safe again in August, keeping stock holdings steady and putting more money into cash. A survey of 11 managers showed investors continued to pour money into US fixed income securities, while remaining wary of emerging markets, trimming allocations to both stocks and bonds.
The poll also signalled concerns about Japan, barely a few months after they began to put more money to work in Tokyo’s markets.
European fund managers increased exposure to US stocks, and a number of fund managers said they felt that equities had taken such a recent tumble that prices now looked attractively cheap.
Fund managers in Europe also pulled money out of euro zone bonds and added to US bond holdings, partly because of a more stable tone to the dollar over recent weeks. Also, some managers said the devastating floods in central Europe could force the German government to issue more bonds to pay for reconstruction work.
Increased exposure to US bonds like Treasuries may also have been prompted by expectations of a further cut to US interest rates and safe-haven buying caused by concerns about a possible US military campaign in Iraq, analysts said.—Reuters