The study, which analysed the views of 238 panellists managing assets of $643bn (€489bn) in July, records a dramatic worsening of sentiment on China’s economy during 2013.
In December 2012, some two-thirds of fund managers forecast stronger Chinese expansion over the following 12 months. However, investor sentiment on the Asian giant has collapsed this year. As Expert Investor Europe reported, one-third of panellists in June expected China’s growth to weaken.
Confidence plummeted further this month, and a net two-thirds of fund managers now anticipate a slower rate of expansion in the world’s second-largest economy in dollar terms – the lowest sentiment reading recorded by BofA Merrill Lynch on this topic since early 2009.
Wariness on China is also reflected in the events fund managers fear could negatively affect the macroeconomic outlook. More than half rated a “China hard landing and commodity collapse” as the biggest “tail risk” – well ahead of EU sovereign/banking and geopolitical crises.
‘Great rotation in full force’
But despite these concerns, more than half of survey participants are upbeat on the prospects for global economic growth – a continuation of positive sentiment since mid-2012. As a result, asset allocators have increased their overweight equities/underweight bonds stance since May.
“With the support of a host of buy signals in recent weeks, the ‘Great Rotation’ is in full force,” wrote Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research. “Our positive view of equities would be further reinforced if the loss of faith in China’s growth story turns out to be overdone.”
A PDF of the BofA Merrill Lynch Fund Manager Survey for July can be downloaded from the BofA Merrill Lynch website, here.