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Global funds raise equities to near 2-year highs
September 30, 2017
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LONDON: World stocks are set for the longest quarterly run of gains since 1997, and investors’ enthusiasm for shares appears undimmed, with a Reuters poll showing average equity exposure in portfolios at the highest in almost two years.

The monthly asset allocation survey of 50 fund managers and chief investment officers in Europe, the United States, Britain and Japan was conducted between Sept. 15-27, a month when MSCI’s all-country world index hit fresh record highs. The Bank of England and the US Federal Reserve also suggested rate rises were on the cards.

The index has enjoyed 11 straight months of gains - its longest winning streak since 2003-4. It is up 15 per cent year-to-date, despite the rate rise talk and tensions between the United States and nuclear-armed North Korea.

The poll showed investors raising their overall equity allocation to 47.9 per cent, a near two-year high, while cutting bond holdings to 39.8 per cent, the lowest level since April.

Since the start of the year, investors have added 2.1 percentage points to their overall equity exposure, preferring to focus on the recovering world economy.

“Despite some signs of weakness in the global economy in recent weeks, it still appears to be growing above market expectations,” said Peter Lowman, chief investment officer at UK-based wealth manager Investment Quorum.

“Excluding any unforeseen geopolitical confrontations, this should be a good environment for global equities, given that we appear to be in a Goldilocks economy.” A number of investors did express concern about complacency, especially as the Fed and the European Central Bank are seeking to wind down their asset buying programmes. Nadege Dufosse, head of asset allocation at Candriam, said this tightening bias would test the resilience of equity markets.

“In particular, the resilience of European equity markets in the context of a stronger euro will be tested,” she said.

Investors remained bullish on European stocks, having raised their eurozone equity holdings by almost 4 percentage points since the start of the year.

The exposure now stands at 20.6 per cent of their global equity portfolios, the highest in at least five years. European stocks are up almost 7 per cent year-to-date and look set to end the quarter up around 1.8 per cent.

Some 77 per cent of poll participants who answered a question on the euro said it was not overvalued at current levels, although the currency has firmed around 1 per cent over the month against the dollar.

Agencies

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