Global investors pile into stocks, still favor Japan

Thu May 30, 2013 9:21am EDT
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By Natsuko Waki

LONDON (Reuters) - Global investors were more upbeat on equities this month than at any time since early 2011, confident that liquidity will remain ample even though the Federal Reserve has started a debate on when to scale back stimulus, Reuters polls showed.

Monthly asset allocation polls of 56 investors across the United States, Europe and Japan, released on Thursday, also showed investors sticking with Japanese stocks in May despite recent volatility, with allocation to Japan at its highest in nearly a year.

Funds on aggregate lifted their equity holdings to 50.9 percent of their portfolios this month, the highest since February and up from 49.6 in April.

The measure of their overweight/underweight positions in equities rose to 1.1 from 0.8 last month for the highest reading since January 2011.

Equity markets were rattled after U.S. Federal Reserve Chairman Ben Bernanke said last week that a decision to scale back the Fed's $85 billion-a-month bond buying program could come at one of the central bank's next few meetings if the economy looked set to maintain momentum.

Investors are not panicking though because the policy-setting committee is divided on when to roll back and there's no sign the Fed will stop its bond buying program immediately.

Combined with expectations for decent global growth of more than 3 percent this year, investors would still prefer to buy risky assets such as equities.

"For now, the combination of likely-to-be extended central bank support, sufficient economic activity and a lack of sound investment alternatives keeps the risk-on mood alive," said Boris Willems, strategist at UBS Global Asset Management.   Continued...

Traders stand outside the New York Stock Exchange prior to the opening bell October 31, 2012. REUTERS/Brendan McDermid