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Johannesburg - Investors expect Europe to fall
into recession in the next 12 months, a Bank of America/Merrill Lynch survey of fund managers for September shows.
An overall total of 286 panellists with $831bn of assets under management participated in the survey from September 1 to 8. A total of 203 fund managers, managing a total of $648bn, participated in the global survey.
Just over 50% of European fund managers now see the region suffering two quarters of negative real gross domestic product growth over the next year, according to the survey. This compared with only 14% expecting the same as recently as July.
Europe's sovereign and banking challenges dominated risks identified by global asset allocators.
The survey showed 68% of survey respondents now viewed the eurozone debt crisis as the largest of these risks, up from 43% in June and 60% in August. Sentiment towards European banks was at its lowest since the survey began asking about it in January 2003.
While other regions also suffered, sentiment towards the US improved somewhat. Only a net 9% of US fund managers now expected the economy to weaken in the next year. Global investors also restored an overweight position in US equities.
"The survey shows that sentiment on Europe is now so negative that contagion risk to the rest of the world has risen significantly," said Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research.
"The current very extreme levels of risk aversion indicate that it is time to look for contrarian trades," said Michael Hartnett, chief Global equity strategist at BofA Merrill Lynch Global Research.
An overall total of 286 panellists with $831bn of assets under management participated in the survey from September 1 to 8. A total of 203 fund managers, managing a total of $648bn, participated in the global survey.
Just over 50% of European fund managers now see the region suffering two quarters of negative real gross domestic product growth over the next year, according to the survey. This compared with only 14% expecting the same as recently as July.
Europe's sovereign and banking challenges dominated risks identified by global asset allocators.
The survey showed 68% of survey respondents now viewed the eurozone debt crisis as the largest of these risks, up from 43% in June and 60% in August. Sentiment towards European banks was at its lowest since the survey began asking about it in January 2003.
While other regions also suffered, sentiment towards the US improved somewhat. Only a net 9% of US fund managers now expected the economy to weaken in the next year. Global investors also restored an overweight position in US equities.
"The survey shows that sentiment on Europe is now so negative that contagion risk to the rest of the world has risen significantly," said Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research.
"The current very extreme levels of risk aversion indicate that it is time to look for contrarian trades," said Michael Hartnett, chief Global equity strategist at BofA Merrill Lynch Global Research.
