Investors see dip in global corporate profits

| | Updated on: Jul 17, 2012

Emerging markets still a beacon of hope, says BofA-ML survey

Investor confidence across the globe appears to have weakened further, led by a sharp decline in expectations of corporate profit growth, according to a Bank of America (BofA) Merrill Lynch survey of global fund managers for July.

Belief wanes

Some 38 per cent of global investors say corporate profits are set to worsen in the coming 12 months, as compared with a net 19 per cent a month ago. The survey noted that a severely deteriorating outlook for profits is driving the fall in confidence. Survey findings have suggested that the percentage point drop is similar to the fall in global confidence in summer 2011, as the sovereign debt crisis took shape.

Belief that corporates can grow profits by 10 per cent or more is at its lowest point since April 2009.

The report noted that both the broader macro-economic outlook and risk appetite have stabilised, however, after two months of sharp deterioration. A net 13 per cent of the panel said that the world economy would weaken in the coming year.

For global investors, emerging markets are still a beacon of hope though. Fund flows into emerging market equities appear to have improved after ten weeks of redemptions in the second quarter, the survey has noted.

Asia-Pacific investors increased their positions in the crowded sectors of technology, autos and retail in July. In particular, the report noted allocations to retail saw the biggest month-on-month increase since September 2011.

“Rising equity prices have failed to lift investor gloom and we still see a quarter of investors expecting a global recession while hopes for further policy easing have been delayed,'” said Mr Michael Hartnett, Chief Global Equity Strategist at BofA Merrill Lynch Global Research.

An overall total of 261 panelists with $708 billion of assets under management participated in the survey from July 6-12. The survey was conducted by BofA Merrill Lynch research with the help of market research company, TNS.

Published on July 17, 2012

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