Recovery will sustain, say global fundmen

Two-thirds of global fund managers believe the current economic recovery will sustain and a double-dip recession is unlikely.

A survey by Bank of America Merrill Lynch said 72% of managers foresee an increase in corporate profits.

The surge in equities since March, where many markets have doubled, has not significantly altered the fundmen’s view on valuations.

“The valuations are not looking frenzied; we are positive on equities based on better earnings expectations,” said Pradeep Dokania, managing director and head, global private client, at DSP Merrill Lynch.

The survey said risk appetite seems to be back among investors as the risk appetite index (+44) has finally risen over long term average of +40 (based on last 8 years data), on back of greater conviction in both macro and micro outlook.

For fund allocations, the emerging markets seem to be the favourite for investors worldwide.

“Having considered the alternatives, investors renewed the overweight position on emerging market funds. A net 36% of investors still see it as the region they want to overweight on a 12 months view,” said Gary Baker and Michael Hartnett, authors of the fund manager survey.

Apart from faster recovery, flows are also being drawn to domestic consumption stories such as India, China and Indonesia, said Gopal Agrawal, head-equiry, Mirae Asset Global Investments.

“Also currency is an important factor driving money away from the US and into emerging markets such as Brazil and India,” Agrawal said.