Investors cut bond exposure to 7-year low - poll
LONDON, Sept 17
LONDON, Sept 17 (Reuters) - Global investors cut their allocation to bonds to the lowest in seven years in September as they positioned for stronger global growth and higher inflation, a poll showed on Tuesday.
The monthly fund managers poll from Bank of America Merrill Lynch showed a net 68 percent of investors are underweight bonds, the lowest since April 2006, and three out of four believe bond yields will be higher in 12 months.
A net 60 percent of respondents are overweight equities, up from 56 percent one month earlier and the highest level since February 2011, with allocations to British and euro zone shares at 11- and 6-year peaks respectively, the poll showed.
The index measures the difference between overweight and underweight positions across a panel of 236 respondents managing assets worth $689 billion in total.
A net 27 percent of respondents plan to take an overweight position on European equities over the next 12 months.
Global inflation expectations rose to their highest level since early 2011, with a net 55 percent of respondents expecting it to be higher in 12 months, while just a net 1 percent of investors anticipates a recession over the same period, the fewest since 2011.
"We have only really, in our view, just begun ... a multi-quarter, if not multi-year, move from bonds to stocks," said John Bilton, European investment strategist at BofA Merrill Lynch.
"I'm pretty comfortable equity risk premium, the valuation assumptions around equities, the gradually improving economy and the pick-up in inflation expectations ... would tend to favour the equity complex over the bond complex."
Cash levels rose by 10 basis points to 4.6 percent, reflecting concerns about a crash in the bond market as a result of tighter liquidity conditions, according to the bank's strategists.
Sentiment surrounding the Chinese economy rebounded sharply, with a net 28 percent of respondents now expecting stronger growth in the world's second largest economy, compared to a net 32 percent who were expecting a slowdown last month.
The risk of a hard landing in China and a subsequent collapse in the commodity prices was no longer the biggest concern for investors.
Yet positioning failed to reflect this more sanguine view on China, with a net 80 percent of investors still "underweight" emerging market equities, leaving room for a catch-up in the coming months, according to BofA-Merrill Lynch strategists.
"Investors were staring into a bit of a bottomless pit with regards to China two-three months back and worried Chinese policy was not keeping pace with a slowing economy," Bilton said.
"Certainly it looks as if those fears have receded." (Reporting By Francesco Canepa; editing by Stephen Nisbet)
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