Investors avoid equities, hold cash in December

Posted 12/13/11

LONDON - Global asset allocators continued to avoid equities in the final month of 2011 and maintained cash holdings amid the worst liquidity conditions since 2009, a Bank of America Corp. survey showed.

A net 8 percent of the 290 respondents, who together manage $608 billion, said they were “overweight” equities in December, compared with a net 5 percent who were “underweight” last month. That is still near the lowest levels in more than two years. More than a third held more cash than the benchmark in December.

“Investors end 2011 in a grim, resigned mood,” Michael Hartnett, chief global equity strategist at BofA wrote in the report. “The consensus is more vulnerable to good news rather than bad news in the New Year.”

The Stoxx Europe 600 Index has tumbled 14 percent this year as policy makers struggle to contain the region’s debt crisis that has sent sovereign borrowing costs surging to euro-area highs. The gauge pared some losses after the Federal Reserve and five other central banks lowered the cost of dollar funding and China cut its reserve ratio for banks on Nov. 30.

Even so, views on market liquidity conditions turned more bearish in December, moving to minus 13 percent from a net zero percent last month, the lowest reading since April 2009. The survey’s risk-appetite indicator stabilized near a two-year low, climbing to 31 from 30, still below the long-term average of 40.

Betting on the U.S.

Among those willing to bet on the stock markets, U.S. equities tied with emerging markets as the top region. A net 23 percent said they were “overweight” American stocks. That’s up from 20 percent last month and the largest holding since July.

Fifty percent said the outlook for corporate profits is the most favorable in the U.S, while a record 72 percent say the euro area has the least favorable outlook.

Investors further reduced their holdings in European equities, according to the survey. Thirty-five percent said they were “underweight” the region in December, up from 30 percent last month. They also increased their underweight stance in U.K. stocks to 13 percent from 9 percent in November.

The global fund manager survey took place from Dec. 2 to Dec. 8.

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