British investors boost emerging market equity bets -poll

LONDON Fri May 30, 2014 9:00am EDT

LONDON May 30 (Reuters) - Top British investors cut their North American and UK equity holdings in May, seeing more value in higher-yielding emerging market stocks, a Reuters poll showed.

A monthly poll of 12 UK-based investment managers released on Friday showed overall equity holdings fell to 53.8 percent in May, from 55.6 percent in April, as investors felt stock valuations were looking stretched.

"Equities continue to mark time," said Robert Pemberton, investment director at HFM Columbus. "They look fairly priced in valuation terms and need firm evidence of a sustainable increase in corporate earnings to make further significant progress."

Holdings in UK stocks stood at 27.3 percent, down from 29.6 percent in April, while holdings in North American stocks fell to 29.9 percent from 30.8 percent.

"With U.S. markets attaining new highs and the UK market within touching distance of them, it is perhaps not surprising that we have seen some valuation-induced nervousness and market rotation in recent weeks," said Mark Robinson, chief investment officer at Berry Asset Management.

The UK's blue-chip FTSE 100 index closed near a 14-year-high on Thursday, while the U.S's S&P 500 index reached another record high, as both indices were buoyed by the latest round of merger activity and speculation.

But it was a different story for investment in emerging market equities.

Holdings in emerging Asian stocks rose to 10.1 percent, up from 8.4 percent in April, while investors lifted their Latin American stock bets to 1.7 percent which, while relatively low, marked the highest level since at least June 2012. Emerging European stock holdings rose to 1.4 percent from 0.5 percent.

"Frontier and emerging markets have been surprisingly strong over the past few months, as investors focus more upon those regions that continue to show superior growth," said Peter Lowman, chief investment officer at Investment Quorum, adding India had reacted "very positively" to its recent election.

India's benchmark BSE index hit record highs earlier this month as it emerged that Narendra Modi had won a landslide victory to become prime minister of the world's largest democracy.

The Reuters poll, conducted from May 12 to 28, showed bond holdings had risen to 23.9 percent, from 22.5 percent in March, while cash holdings were up at 6.5 percent, from 5.9 percent the previous month.

"Whilst sovereign bonds might look expensive, the reluctance of central banks to raise interest rates in the foreseeable future helps to give this asset class some continued attractions," added Investment Quorum's Lowman. (Reporting By Jemima Kelly; Editing by Susan Fenton)