LONDON -- Sharp falls on world stock markets in late February and early March prompted investors to cut risk but failed to derail expectations of a benign economic climate in which equities prosper, a poll showed on Wednesday.
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Investment bank Merrill Lynch's monthly survey of global fund managers showed a rise in cash holdings and slight cutback in equities as well as a growing wariness of U.S. assets.
But it also showed a majority of fund managers believe global stocks to be at fair value and bonds to be overpriced and equities staying the clear investment of choice.
At the macroeconomic level, meanwhile, there was little sign that the month's turbulence on financial markets had prompted investors to change their outlook.
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"Net net, people haven't really changed their global view," said David Bowers, Merrill poll consultant. The survey was taken as world stock markets took a tumble on worries ranging from popular foreign exchange strategies unwinding to risky mortgage losses and downward growth surprises in the United States and China.
The survey did show this had led to a decrease in risk appetite among investors, who shortened their investment time horizons shuffled their portfolios to protect them.
"(There was a) big pullback in risk appetite but not as much as in May and June last year," Bowers said, referring to the 2006 market correction.
"In the short-term people aren't bearish," he said.
EQUITIES RULE
Some 60 percent of respondents said they were overweight equities in March, down from 67 in February but at the same level as January.
A typical portfolio had 53 percent of its weightings in equities versus 55 percent in February and January.
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Bonds remained clearly out of favour, even more so than a month earlier despite the ructions on stock markets. Some 64 percent were underweight, up slightly from February.
Cash holdings grew, however, as investors sought some safety, with 40 percent saying they were overweight compared with 29 percent in February.
Merrill said its own risk and liquidity indicator based on the poll has fallen.
Respondents, however, were only slightly more pessimistic about the global economy than they have been with 52 percent expecting it to weaken over 12 months versus 48 percent in February.
At the same time, 24 percent were expecting a stronger world economy compared with 22 percent a month earlier.
On the flip side, the survey indicated some concern about the U.S. economy with U.S. equities the least favourite stocks and the dollar considered to be overvalued.
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