Global funds more confident on US, Japan growth - BofA poll

LONDON, March 19 Tue Mar 19, 2013 8:30am EDT

LONDON, March 19 (Reuters) - Global investors are growingly confident about the economic and corporate outlook in the United States and Japan, while their growth expectations for China are deteriorating, a closely-watched fund managers' survey showed on Tuesday.

The monthly poll from Bank of America Merrill Lynch showed a net 57 percent of investors are now overweight equities, the highest in more than two years. The index reading shows the difference between overweight and underweight positions.

Allocation to U.S. stocks, at a net 14 percent overweight, is the highest since July. Fund managers are most overweight Japanese stocks since 2007.

The survey, which polled 254 participants with combined assets of $691 billion, showed investors are a net 53 percent underweight in bonds, up from 47 percent in February.

"There's a big surge of optimism... The outlook for corporate profits and ample liquidity are keeping investors bullish about the region. Asset allocation is skewed towards the U.S. and Japan," John Bilton, European Investment Strategist at BofA Merrill, told a briefing.

"There's a slump in the outlook for Chinese growth. The European crisis has re-emerged as the biggest tail risk for the first time since August 2012."

Cash allocation slipped to a net underweight for the first time in two years. Average fund manager cash levels held steady at 3.8 percent for the third consecutive month.

Driving investor optimism are the liquidity conditions. A net 60 percent of respondents rated liquidity conditions as positive, which are the most favourable since at least 2007.

China growth expectations ebbed. Only a net 14 percent of fund managers expect a stronger Chinese economy this month, down from a net 60 percent in February, registering their lowest level since October and the biggest monthly decline on record.

Many investors think the bulk of global growth may be behind them, with a net 65 percent of respondents viewing the world economy to be in mid- to late cycle. (Reporting by Natsuko Waki; editing by Ron Askew)