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Weightings to Japan rise significantly, says survey

Global fund managers have upped their weightings to Japan, according to the latest Bank of America Merrill Lynch Survey, as risk appetite hit its highest level since January 2006.

For the past several months in the survey managers have talked up the prospects of the global economy, but maintained a cautious stance in their funds. However, in January a net 2 per cent of global managers said they were taking “higher than normal risk”, which compares with last month where a net 7 per cent  said they were taking “below normal risk”.

This increase in risk appetite was most noticeably apparent in Japan. In January the net underweight in which global fund managers were in Japan dropped to 10 per cent, from a 33 per cent underweight position in December.

BofA Merrill Lynch global research head of European equities Gary Baker describes the latest survey as one of the most bullish for a long time.

He says: “Investors are pro growth, pro risk and pro equities. This has seen lots of cash put to work in January, with managers showing signs of turning to laggard sectors and regions that they have shunned in recent months. Japan has been the real big winner, with optimism over the economy and earnings picking up from November.”

According to the survey, a net 63 per cent of the regional panel expects Japan’s economy to improve in 2010—up from 30 per cent in November.

Unsurprisingly, the jump in confidence was matched by a rise in the amount held in equities, with a net 52 per cent of managers overweight in the asset class in January, up from 37 per cent last month. This, according to BofA Merrill Lynch, is the highest overweight since July 2007.

Meanwhile, the amount global fund managers held in cash dropped to its lowest level for eight years, with a net 7 per cent of allocators underweight in the asset class. The underweight stance to bonds also increased over the month, up from a net 39 per cent underweight in December, to a 47 per cent underweight in January.

British equities were the most unloved among global managers in January, with emerging markets continuing to be the most favoured region.

Some 209 fund managers with a total of £329 billion of assets participated in the survey. It was conducted with TNS, a market research company, from January 8-14.



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