British investors hike exposure to stocks in December-poll

LONDON Dec 20 (Reuters) - British investors have greeted the year-end by sharply increasing their exposure to shares as hopes rise that economic stability and rising corporate profits will return in 2013.

A monthly poll of 13 UK-based chief investment officers and fund managers found the average allocation to equities in global balanced portfolios jumped to 52.3 percent in December, from 50.8 percent a month earlier.

The increase to the highest exposure to stocks since April marks an acceleration of rises over the second half of 2012. ]

Portfolio managers attributed rising confidence to a sense that the world is no longer facing the kind of severe systemic risks seen earlier in the year such as the possible collapse of the euro.

"The risks facing markets in 2013 are more likely to be normal risks, as opposed to the systemic, potentially extreme risks which markets faced in 2012," said Alec Letchfield, chief investment officer for UK Wealth at HSBC Global Asset Management.

Some respondents to the poll said they were expecting to be pleasantly surprised by a pick-up in good news about the world economy, further boosting their faith in stock markets.

"We believe that there will be an unexpected upturn in growth and sentiment, particularly in the U.S., which will help emerging markets and make things a whole lot more pleasant in 2013," said Lee Robertson, chief executive officer of Investment Quorum.

The rise in equity exposure came largely at the expense of allocations to alternative asset classes such as hedge funds, private equity or commodities, dropping to 11.4 percent from 12.2 percent.

The average allocation to bonds eased to 28.2 percent from 28.6 percent while cash was down 20 basis points at 5.4 percent and property fell by the same amount to 2.7 percent.

But investors cautioned they remain cognisant of a number of potentially serious issues, particularly the knock-on impact of policy tightening in the United States as the government grapples with deficits.

The euro zone sovereign debt crisis remains unresolved and an economic slowdown in China could have unpredictable consequences around the world, they argue.

"(We are) becoming more confident about a sustainable upturn in the global economy appearing by 2014. Nevertheless, there are risks to overcome," said Andrew Milligan, head of global strategy at Standard Life Investments.

However, markets have become accustomed to these issues during the course of 2012 and investors are increasingly battle- hardened following the turmoil of the global financial crisis. Most are therefore feeling upbeat.

"Provided both sides of the U.S. political divide can find a way to resolve the current 'fiscal cliff' impasse, and we can overcome other headwinds... 2013 will hopefully see a further improvement in confidence," said Mark Robinson, chief investment officer of Berry Asset Management.

However, despite such optimism, next year is still likely to prove volatile.

"No respite for our blood pressure unfortunately," said Mehvish Ayub, investment manager at Baring Asset Management. (Editing by Stephen Nisbet)