Funds turn slightly more bullish, buy more stocks

Thu Aug 30, 2012 7:04am EDT
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By Ingrid Melander

LONDON (Reuters) - Global investors, most of whom do not expect more monetary stimulus from the U.S. Federal reserve this year, edged towards more risky assets in August, encouraged by ECB plans to tackle the euro zone crisis and signs of improvement in the U.S. economy, a Reuters poll showed on Thursday.

Investors trimmed their cash and government securities allocations and bought more stocks and corporate bonds, the monthly survey of 59 leading investment houses in the United States, continental Europe, Britain and Japan showed.

"Equities look very appealing when compared with government bonds - with an extremely high risk premium," said Dirk Wiedmann, Head of Investment at Rothschild Wealth Management.

But despite reaching a four-month high of 49.5 percent of portfolios, equity holdings remain near their lowest level since the global poll data was first compiled in January 2010, and allocations to safe-haven cash are still close to record highs, with wary investors warning of risks ahead in September.

"The uncertainty surrounding the next steps in the euro zone is running at a fever pitch," said Alan Gayle, senior investment strategist at U.S-based Ridgeworth Investments. "A lot of investors feel that we're at a very tense period in the negotiations, and they would prefer to wait on the sidelines."

The survey showed that the reaction to European Central Bank chief Mario Draghi's pledge to do whatever it takes to save the euro was mixed, with many waiting to hear more about the heated debate on bond-buying plans from the central bank's September 6 policy meeting.

While an overwhelming 95 percent of fund managers believe that the ECB will buy Spanish or Italian bonds by the end of the year, just over half said that Draghi's announcements did not change their view of the euro zone crisis.

In particular, Draghi failed to convince most investors to buy more euro zone bonds, with a sharp drop in allocations in the United States pushing global holdings of the bloc's government securities to the lowest in at least two years, despite more buying by fund managers based in the euro zone and Japan.   Continued...