Europe is still in favour with investors globally despite the European Central Bank (ECB) delivering levels of stimulus below market expectations.
Bank of America Merrill Lynch’s fund manager survey has found a majority of investors favour Europe the most as an investment destination, with the region viewed as cheapest among developed markets.
Both stock and macro sentiment remains bullish, the survey finds, despite lower-than-expected stimulus. Overall, 55% of global fund managers are overweight to Europe as of December 10 2015.
European growth and inflation forecasts among investors marginally improved, with nine in 10 believing another region-wide recession unlikely.
From a country-specific perspective, Germany remains highly favoured, with 28% willing to overweight the index.
There was a significant improvement in sentiment towards Italy, with 33% overall saying they would overweight Italian equities over the next 12 months, up from 7% last month.
Switzerland and the UK saw sizeable declines in investor sentiment, with 44% saying they would underweight Swiss stocks, and 31% underweighting UK equities.
In terms of sector weightings, healthcare and tech saw gains, while media, banks and industrials experienced the largest declines. Perhaps unsurprisingly, fund managers are also underweight commodities, although managers see the sector as undervalued as a result of its long period spent out of favour.
Overall, within European equity markets the level of risk aversion remains high: a net 22% of European fund managers believe low beta stocks will outperform high beta stocks over the next year, and a net 42% think high quality equities will outperform low quality stocks over the same period. Caution was also evident from cash levels, which were unchanged at the above-average level of 4.5%.
The survey gauged the opinions of 215 asset management professionals, who collectively hold $620 billion (€566 billion) in assets under management.
©2015 funds europe