Global investors have raised their holdings of cash significantly in response to a weaker global economic outlook, particularly in China, according to the Bank of America Corp (NYSE:BAC) Merrill Lynch Fund Manager Survey for July. Overall, equity allocations are unaffected by the higher risk aversion, however.
Confidence in the global economy falls sharply: 42 percent of investors expect strengthening over next year, down from 55 percent a month ago.
China heads concerns: net 62 percent expect economy to weaken in next 12 months; eight out of 10 see GDP below 6 percent by 2018.
Cash levels soar to highest level since 2008 crisis – 5.5 percent of portfolios; gold judged undervalued for first time in five years.
Increased pessimism on China led further weakness in assets linked to China: Commodity allocation drops to six-month low, and Global Emerging Market equities stays as most unloved region with allocations at 16-month low.
Bonds still seen as much more overvalued than equities and more at risk of volatility-driven crash; equity overweights rise to net 42 percent.
U.S. dollar bullishness strengthens despite postponing of expected U.S. rate rise to Q4 2015 or later, replacing June consensus of Q3.
Appetite to overweight European stocks rises, although potential eurozone breakdown now biggest “tail risk.”
“Rising risk aversion and stretched cash levels provide a contrarian buy signal for risk assets in Q3,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“Despite the Greek newsflow, intention to own European assets is high and rising, though global growth remains vitally important for European stocks,” said Manish Kabra, European equity strategist.
Fund Manager Survey
An overall total of 191 panelists with US$510 billion of assets under management participated in the survey from 2 July to 9 July 2015. A total of 149 managers, managing US$399 billion, participated in the global survey. A total of 90 managers, managing US$196 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Global 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. (Original Source)
Shares of Bank of America closed yesterday at $17.02. BAC has a 1-year high of $18.21 and a 1-year low of $14.84. The stock’s 50-day moving average is $17.05 and its 200-day moving average is $16.30.
On the ratings front, Bank of America has been the subject of a number of recent research reports. In a report issued on June 24, Deutsche Bank analyst Matt O’Connor maintained a Buy rating on BAC, with a price target of $18.50, which represents a potential upside of 8.7% from where the stock is currently trading. Separately, on June 17, Oppenheimer’s Chris Kotowski maintained a Buy rating on the stock and has a price target of $21.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Matt O’Connor and Chris Kotowski have a total average return of 5.6% and 3.5% respectively. O’Connor has a success rate of 77.1% and is ranked #849 out of 3702 analysts, while Kotowski has a success rate of 70.8% and is ranked #734.
The street is mostly Bullish on BAC stock. Out of 6 analysts who cover the stock, 4 suggest a Buy rating and 2 recommend to Hold the stock. The 12-month average price target assigned to the stock is $18.90, which represents a potential upside of 11.0% from where the stock is currently trading.