ID :
207170
Wed, 09/14/2011 - 18:53
Auther :
Shortlink :
http://m.oananews.org//node/207170
The shortlink copeid
Low European Sentiment Poses Contagion Risk to Japan: Merrill Lynch
London, Sept. 13 (Jiji Press)--Investor sentiment is growing ever more sour toward the Japanese economy due to Europe's weak outlook, a Merrill Lynch Fund Manager Survey showed Tuesday.
Investors expect Europe to fall into recession within the next 12 months and 55 pct of European fund managers now see the region suffering two quarters of negative real gross domestic product growth over the next year. This compares with only 14 pct expecting the same fate in July.
"The survey shows that sentiment in Europe is now so negative that contagion risk to the rest of the world has risen significantly," said Gary Baker, head of European equities strategy at Merrill Lynch Global Research.
This was demonstrated by only a net 42 pct of Japanese fund managers expecting the Japanese economy to strengthen in the next year, down from a net 75 pct last month. A net zero pct expect Japanese corporate earnings to improve in the period, compared to a net 58 pct last month.
The survey also showed that growth expectations for Japan saw a fall in optimism following the strong recovery of recent months. However, it still remains comfortably in expansionary territory.
"Having seen several months of improvement in Japan, that improvement has really halted and started to somewhat deteriorate," Baker said. "You could argue that you're probably reaching a crescendo on that in terms of a natural pendulum swing, but I think it's probably been hastened a little bit by this global risk appetite decline."
Regional equity allocation also saw a huge drop as asset allocators favored the United States and emerging markets. Allocations to Japan barely changed over the month. A net 4 pct of asset allocators are underweight Japan, as opposed to a net 3 pct overweight in August.
Elsewhere the survey showed that investor growth expectation on a global level actually held up relatively well in spite of European woes. Only a net 17 pct of investors expect a weaker economic growth over the coming 12 months, compared to a net 13 pct last month. Investors are pricing in a banking crisis focused on Europe, but not a global economic crisis, the survey indicated.
Two-thirds of investors also predicted that there would be no Federal Reserve interest rate hike before 2013, and half said that less than 1,100 on the S&P 500 index will prompt a third round of quantitative easing, or QE3.
A total of 268 fund managers participated in the global survey, conducted from Sept. 1 to last Thursday.
Investors expect Europe to fall into recession within the next 12 months and 55 pct of European fund managers now see the region suffering two quarters of negative real gross domestic product growth over the next year. This compares with only 14 pct expecting the same fate in July.
"The survey shows that sentiment in Europe is now so negative that contagion risk to the rest of the world has risen significantly," said Gary Baker, head of European equities strategy at Merrill Lynch Global Research.
This was demonstrated by only a net 42 pct of Japanese fund managers expecting the Japanese economy to strengthen in the next year, down from a net 75 pct last month. A net zero pct expect Japanese corporate earnings to improve in the period, compared to a net 58 pct last month.
The survey also showed that growth expectations for Japan saw a fall in optimism following the strong recovery of recent months. However, it still remains comfortably in expansionary territory.
"Having seen several months of improvement in Japan, that improvement has really halted and started to somewhat deteriorate," Baker said. "You could argue that you're probably reaching a crescendo on that in terms of a natural pendulum swing, but I think it's probably been hastened a little bit by this global risk appetite decline."
Regional equity allocation also saw a huge drop as asset allocators favored the United States and emerging markets. Allocations to Japan barely changed over the month. A net 4 pct of asset allocators are underweight Japan, as opposed to a net 3 pct overweight in August.
Elsewhere the survey showed that investor growth expectation on a global level actually held up relatively well in spite of European woes. Only a net 17 pct of investors expect a weaker economic growth over the coming 12 months, compared to a net 13 pct last month. Investors are pricing in a banking crisis focused on Europe, but not a global economic crisis, the survey indicated.
Two-thirds of investors also predicted that there would be no Federal Reserve interest rate hike before 2013, and half said that less than 1,100 on the S&P 500 index will prompt a third round of quantitative easing, or QE3.
A total of 268 fund managers participated in the global survey, conducted from Sept. 1 to last Thursday.
