Japan Replaces Europe as the Dog in Eyes of Investment Community
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Investors have become more bearish on Japan as concerns grow over a dispute with China over the Senaku Islands and its impact on trade, according to the BofA Merrill Lynch Fund Manager Survey for October.
A net 38 percent of global asset allocators are underweight Japanese equities, the lowest reading since March 2009 and up from a net 23 percent a month ago. For the second consecutive month, a net 24 percent of investors say Japan is the region they most want to underweight.
Pessimism within Japan has risen acutely in the past month. A net 30 percent of the regional panel believes the Japanese economy will weaken in the coming year, up 26 percentage points since September. A net 22 percent expects Japanese earnings per share to decline, up from a net 9 percent a month ago.
Meanwhile, long-time dog, Europe, was viewed in a more positive light.
"The outlook for European equities is improving, eurozone fears are receding and appear largely priced into equity risk premia; core government bonds offer negative real yields so the impetus to rotate into stocks in Europe, as the outlook stabilizes, is profound," said John Bilton, European investment strategist at BofA Merrill Lynch Global Research.
While positive sentiment towards the global economy and equities continues to repair, concerns are growing about the impact of the U.S. fiscal cliff, according to the survey.
A net 38 percent of global asset allocators are underweight Japanese equities, the lowest reading since March 2009 and up from a net 23 percent a month ago. For the second consecutive month, a net 24 percent of investors say Japan is the region they most want to underweight.
Pessimism within Japan has risen acutely in the past month. A net 30 percent of the regional panel believes the Japanese economy will weaken in the coming year, up 26 percentage points since September. A net 22 percent expects Japanese earnings per share to decline, up from a net 9 percent a month ago.
Meanwhile, long-time dog, Europe, was viewed in a more positive light.
"The outlook for European equities is improving, eurozone fears are receding and appear largely priced into equity risk premia; core government bonds offer negative real yields so the impetus to rotate into stocks in Europe, as the outlook stabilizes, is profound," said John Bilton, European investment strategist at BofA Merrill Lynch Global Research.
While positive sentiment towards the global economy and equities continues to repair, concerns are growing about the impact of the U.S. fiscal cliff, according to the survey.
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