Global economy in recession, feel majority of fund managers

New Delhi, Oct 19 (PTI) With leading world economies
trying their best to infuse liquidity in their systems in the
midst of worsening financial crisis, seven out of 10 fund
managers believe the global economy has entered a phase of
recession, says a survey.

According to Merrill Lynch's latest survey of global
fund managers, about 69 percent of the respondents believe
that the global economy is in the grip of recession, which is
up significantly from 44 percent one month ago.

Similarly, the percentage of investors who believe
that monetary policy is too restrictive has reached a whopping
59 percent, it added.

The U.S. economy, which has witnessed a drop of 0.2
percent in growth in the third quarter this year, is forecast
by economists to face another decline in the fourth quarter.

Technically, two straight quarters of negative
economic growth is termed as recession.

The survey further said that low risk appetite and a
belief that equities are undervalued could provide the
foundation for a rally, and growing risk aversion has led to a
record 49 percent of respondents having a huge cash pile.

The number of respondents, who believe equities are
undervalued, has reached a 10-year high, at 43 percent, the
survey revealed.

"Fund managers are waiting for the triggers that will
give them the confidence to buy," said head of E.M.E.A. Equity
Strategy at Merrill Lynch Gary Baker.

"What they are looking for is a loosening of monetary
conditions and third quarter earnings to clarify where
problems and opportunities lie across equity markets," Baker
added.

The survey further said that the third quarter earnings
would help them gauge how the financial crisis has impacted
the real economy.

However, it said that respondents appear to be giving
little or no credibility to consensus earnings estimates for
the year ahead with net 92 percent of surveyed fund managers
considering estimates as too high.

The survey also found that the U.S. fund managers are now
much closer to fully accepting that what they expect would be
a deep and prolonged U.S. recession.

"In our view, it is too soon to say we have reached a
bottom in equity markets given the current financial market
turmoil," Merrill Lynch senior U.S. economist Sheryl King
said.

According to the survey, the gloom has concentrated in
Europe from around the world, with nine out of 10 fund
managers expecting economic conditions to worsen, while the
net percentage of European specialists forecasting recession
has doubled to 74 percent from 37 percent in September.

A total of 172 fund managers participated in the global
survey from October 3 to October 9, managing a total of U.S.D.
531 billion. PTI