(Bloomberg News) The world's largest fund managers have reduced their bullishness towards equities at a record pace on concern that inflation may derail global economic growth, according to a survey by HSBC Holdings Plc.
Forty-four percent of the fund managers polled had an "overweight" outlook on equities in the second quarter, down from 100 percent in the previous three months, according to the survey. That's the fastest reduction in the five-year history of the survey, which gathers the quarterly views of 13 investment houses that collectively manage a total of $4.35 trillion of assets, or 17 percent of global funds under management, according to the bank.
"Fund managers have faced a lot of uncertainties such as the Middle East political crises and the earthquake in Japan in the past months," said Bruno Lee, HBSC's Hong Kong-based Asia- Pacific head of wealth management, in a briefing today. "The inflationary pressure, coupled with interest-rate hikes in emerging markets, exacerbates worries over global economic growth."
Just 13 percent of the managers surveyed had an "overweight" view of cash and bonds, with 50 percent rating the less risky assets as "neutral." On equities, 44 percent of respondents were "neutral," while 11 percent were "underweight."
The World Bank lowered its growth forecast for the global economy this year to 3.2 percent from a January estimate of 3.3 percent, to reflect Japan's earthquake and nuclear disaster and political unrest in the Middle East and North Africa. Emerging- market economies need to speed spending cuts and interest-rate hikes as they fight inflation and overheating, the World Bank's manager of global macroeconomics Andrew Burns told reporters yesterday.
Global Stocks Decline
The MSCI AC World Index, which tracks equities in both emerging and developed markets, has fallen 2.1 percent since the start of the second quarter, compared with a 3.9 percent gain in the first three months.
Equity funds recorded net outflows of $153.6 billion in the first quarter, compared with the $115 billion outflow in the previous quarter, the HSBC survey showed.
Seventy-five percent of the fund managers were neutral towards Greater China stocks, 32 percentage points higher than the first quarter, as tightening measures and concerns over a potential growth slowdown weighed down investors' sentiment, the survey said.
Japan Recovery Bets
More than half of fund management companies polled, including BlackRock Inc., Fidelity Investment Management and Franklin Templeton Investments, have turned bullish about Japanese equities this quarter, up from 38 percent in the first quarter, it added. Investors are betting on opportunities for rebuilding after the country was hit by a magnitude-9 earthquake on March 11 that left almost 24,000 people dead or missing.