Fund Managers Bullish on Stocks in Q3: HSBC

Date: Tuesday, September 6, 2011
Author: Darren Boey and Weiyi Lim, Bloomberg

Global fund managers are bullish on stocks for the third quarter, as the turmoil in financial markets offers investors “attractive buying opportunities,” according to a HSBC Holdings Plc (5) survey.

A survey of 12 investment companies overseeing $4.4 trillion in funds showed 63 percent are holding “overweight” positions on equities this quarter, up from 44 percent in the previous three months, HSBC said in a statement today. Some 57 percent of fund managers are “underweight” bonds in the third quarter, compared with 38 percent in the previous period.

“Current market volatility has created attractive buying opportunities for long-term investors,” Geoffrey Pidgeon, the head of global investments at HSBC Australia, said in the statement. “While there is continued uncertainty around growth in the U.S., corporate earnings forecasts remain positive.”

The MSCI All-Country World Index sank 7.5 percent in August, its biggest monthly loss in more than a year, amid signs the U.S. recovery is faltering and as Europe’s debt crisis worsened. The measure of developed and emerging markets slid 0.3 percent as of 11:42 a.m. in Singapore, a fourth day of losses. Data on Sept. 2 showed U.S. employment stagnated last month.

The 11 percent slump in the MSCI All-Country World Index this year means the gauge is valued at 10.9 times estimated earnings, less than the five-year average multiple of 13.6 times. Profits for Standard & Poor’s 500 Index companies may grow 19.4 percent in 2011 from a year earlier, according to earnings estimates compiled by Bloomberg.

Greater China

Fund managers also turned more bullish on equities in the Greater China region this quarter amid speculation monetary- tightening policies are coming to an end, the HSBC survey showed. Inflation in the world’s fastest-growing economy quickened to a three-year high of 6.5 percent in July. The rate of consumer price increases may have eased to 6.2 percent last month, according to the median forecast of economists surveyed by Bloomberg News before the release of the data this week.

The People’s Bank of China has increased its reserve requirement ratio nine times since the second half of 2010, and raised interest rates five times during the period. The central bank last boosted the ratio in June and is on its longest pause since the latest series of increases began in November.

“Global fund managers are looking toward the emerging markets for opportunities and are focusing on Greater China equities as market expectations of the end of the Mainland’s tightening cycle continue,” said Pidgeon.

China’s Policies

Inflation is no longer a major concern in China and tightening policies should be eased, Wang Jian, secretary- general of the China Society of Macroeconomics, affiliated to the National Development and Reform Commission, said in an interview with Hexun.com published yesterday.

The proportion of fund managers holding “overweight” positions on Greater China stocks climbed to 57 percent this quarter, compared with 25 percent in the previous three months, HSBC said. Half of all fund managers are “underweight” on European equities, up from 11 percent in the second quarter, HSBC said.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net