LONDON: Global fund managers said the euro was cheap and they were seeking more exposure to it and European equities on the back of a massive fiscal stimulus plan, a Bank of America survey showed on Tuesday.
Among factors boosting European assets is Europe’s relative success in gradually reopening its economy and the European Union’s proposed €750 bil (RM3.62 tril) recovery fund to help countries deal with the fallout from the coronavirus crisis.
Investors’ allocation to euro zone equities increased 9 percentage point to net 16% overweight, the largest increase in net weighting of any region this month. A net 44% of the 210 investors surveyed between Jun 2-9 said the euro was cheap.
The survey also showed a rush to the resilient US technology stocks was gathering more pace in July with a record 74% of investors calling it the most “crowded trade”.
The Nasdaq index, home to the world’s largest tech stocks, has been setting record highs even as Covid-19 has been spreading fast in the United States.
Though risk assets had been rising since the record selloff in March, “sentiment remains cautious” with cash levels rising to 4.9% from 4.7%, BofA added.
“Wall Street’s US$24 tril (RM102.33 tril) rally yet to elicit ‘greed’.”
The bank said it expects stock markets to remain choppy during summer, recommending selling when the S&P 500 goes above 3,250 points and buying when it falls below 2,950.
Investors saw a coronavirus second wave as the biggest “tail risk” for the fourth month running with just 14% of them expecting a “V”-shaped economic recovery versus 44% expecting a “U”, and 30% a “W”.
A V-shaped recovery is when a plunge in growth is followed by an equally sharp recovery; U-shaped is when recovery takes more than a couple of quarters; and W-shaped refers to a double-dip in growth. – July 14, Reuters
