A net 65% of regional panellists, which take part in the monthly manager survey, believe China’s economy will weaken into the next year. Just over six months ago the same percentage anticipated stronger GDP growth for China.
Over half of managers surveyed identified a ‘hard landing’ in China as a major tail risk to global markets. This compares to just a third of managers who held this view three months ago.
Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, noted the shift in sentiment towards China is impacting the outlook for emerging markets as a whole. Some 44% now view GEM countries as offering the worst outlook for corporate earnings of any region – the most negative level yet recorded in the survey.
On the other hand, managers are the most positive on Japan with respect to its corporate earnings outlook into 2014. All regional managers expect companies in Japan to achieve double-digit earnings growth over the next year.
According to the July survey results, the majority of asset allocators are overweight equities, up nine points in two months to a net 52%. Confidence in the US is also apparent in a net 83% favoring the dollar over other currencies, the highest reading yet recorded by the survey.
The stance towards bonds is increasingly negative with some 55% of fund managers now underweight fixed-income instruments. Cash holdings have also increased to their highest level in a year.
