BofA Merrill Lynch Fund Manager Survey Finds Investors Bullish on Global Growth as They Look Beyond Fiscal Cliff

  BofA Merrill Lynch Fund Manager Survey Finds Investors Bullish on Global
  Growth as They Look Beyond Fiscal Cliff

              Optimism About Chinese Growth Reaches Survey High

Business Wire

NEW YORK & LONDON -- December 18, 2012

Confidence in a recovering global economy is extending into 2013 as investor
fears surrounding the fiscal cliff eased, according to the BofA Merrill Lynch
Fund Manager Survey for December.

A net 40 percent of investors believe the global economy will strengthen in
the year ahead, a rise of six percentage points month-on-month and double the
reading two months ago. The number of investors viewing the U.S. fiscal cliff
as the biggest tail risk has fallen to 47 percent, down from 54 percent in
November. Despite this fall, however, the fiscal cliff remains the number one
worry.

Emerging markets are the preferred region for the panel. Optimism about
China’s economy has reached the highest level recorded by this survey. A net
67 percent of the regional survey respondents say China’s economy will
strengthen in the coming year, up from a net 51 percent in November. A net 38
percent of asset allocators are overweight emerging market equities, double
the level of September’s survey.

“The bulls are back in China, while policy makers elsewhere put bears onto the
back foot. If the bulls are to claim a decisive victory, we need hard evidence
that the economy is reaccelerating,” Michael Hartnett, chief investment
strategist at BofA Merrill Lynch Global Research said. “Growth expectations
and positioning are converging to mid-range levels, but many still think
earnings expectations are too high. When these concerns subside, it’s likely
that cheap valuations of European stocks will attract global fund managers,”
said John Bilton, European investment strategist.

The number of asset allocators overweight U.S. equities has fallen since
November. But allocations to the eurozone are outweighing U.S. allocations for
the first time since November 2010. The net percentage of asset allocators
overweight eurozone equities has risen to seven, up from a net 1 percent in
November. In terms of sector, investors have maintained a broadly “risk on”
stance – allocations to cyclical sectors Consumer Discretionary and
Industrials have increased, and the market is firmly overweight both. But the
number one sector remains Pharmaceuticals.

Third successive month of rising sentiment towards corporate profits

The outlook for corporate performance has improved for the third successive
month and more investors are calling for companies to raise capital
expenditure. A net 11 percent of investors believe profits will improve in the
coming 12 months – a 22-point swing from October when a net 11 percent were
forecasting lower profits.

Pessimism about corporate margins has lessened for the third successive month.
The proportion of investors predicting worsening margins has fallen to a net
27 percent, down from a net 33 percent a month ago and a net 44 percent in
October. Similarly, December’s survey shows reduced skepticism over
corporates’ ability to deliver double-digit profit growth. A net 37 percent
believes global corporate earnings growth will be less than 10 percent, down
from a net 52 percent in November.

A net 64 percent of the panel believes that companies around the world are
under-investing, the highest reading in the history of the survey and an
increase from a net 59 percent month-on-month. Investors are less worried
about dividends and buybacks – the proportion saying that payouts are too low
has fallen to net 28 percent from a net 34 percent.

Emerging market corporates have consolidated their position as the panel’s
favorite. A net 38 percent of investors say that Global Emerging Market
equities have the best outlook for corporate profits in the coming year, up
from a net 32 percent in November.

Japan sentiment rises at home and globally

Global investors’ caution towards Japan has eased, while domestic optimism has
strengthened. The proportion of global asset allocators underweight Japanese
equities has fallen to a net 20 percent, down from a net 34 percent a month
ago.

A net 17 percent of the global panel would like to underweight Japanese
equities in the coming year, but that’s less than the net 30 percent taking
that view in November. A net 90 percent of Japanese investors expect the
economy to strengthen in the coming year, compared with a net 18 percent in
November, while a net 81 percent is forecasting improved earnings in the
coming 12 months.

Liquidity conditions improve

Investors say that liquidity conditions are at their best since May of this
year. The proportion of respondents rating liquidity conditions as “positive”
rose to a net 23 percent, up from a net 13 percent in November. This marks the
third successive month of improving liquidity ratings and follows efforts to
support market liquidity by central banks, including recent rounds of
quantitative easing by the Fed.

Survey of Fund Managers

An overall total of 255 panelists with US$664 billion of assets under
management participated in the survey from 7 December to 13 December. A total
of 193 managers, managing US$503 billion, participated in the global survey. A
total of 135 managers, managing US$305 billion, participated in the regional
surveys. The survey was conducted by BofA Merrill Lynch Research with the help
of market research company TNS. Through its international network in more than
50 countries, TNS provides market information services in over 80 countries to
national and multi-national organizations. It is ranked as the fourth-largest
market information group in the world.

BofA Merrill Lynch Global Research

The BofA Merrill Lynch Global Research franchise covers nearly 3,500 stocks
and 1,100 credits globally and ranks in the top tier in many external surveys.
Most recently, the group was named Top Global Research Firm of 2012 by
Institutional Investor magazine; No. 1 in the 2012 Institutional Investor
All-Asia survey for the second consecutive year; No. 2 in the 2012
Institutional Investor All-China, All-Europe, All-Japan and All-Latin America
surveys; and No. 3 in the 2012 Institutional Investor All-America survey. The
group was also named No. 2 in the 2012 Institutional Investor All-America
Fixed Income survey and in the 2012 Emerging Markets Equity and Fixed Income
survey, covering Emerging Europe, Middle East and Africa.

Additionally, BofA Merrill Lynch Global Research was named the No. 1 Global
Broker by Financial Times/StarMine,as well as rankedNo. 1 in the U.S. and
Europe and No. 2 in Asia. The group was also named No. 1 in Asia and No. 2 in
the U.S. in the Wall Street Journal Best on the Street 2012 Analysts Surveys.
The group was also the winner of the Emerging Markets magazine’s EM Research
Global Award for 2010 and 2011.

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