Confidence in Chinese economy, global economy increases

The Bank of America Merrill Lynch Fund Manager Survey for November revealed that confidence in China’s economic outlook has reached a three year high, an indication of broader optimism regarding the global economy.

More than 50 percent of investors across Asia Pacific, Japan and global emerging markets, the highest number since July 2009, said that China’s economy will become stronger within the next year, a significant increase from five percent last month.

Thirty-four percent of respondents, the highest reading since February 2011 and an increase from 14 percent in October, said that the world economy will also become stronger within the next year.

Concern over the U.S. fiscal cliff, however, has grown, with 54 percent of respondents, as opposed to 42 percent in October, saying that the U.S. fiscal cliff is the biggest risk facing the market.

Corporate profit expectations also increased for the second month in November, with four percent expecting profit outlook to improve within the next year. Two months ago, a net 28 percent of investors expected corporate profits to worsen.

“Momentum has gathered behind the idea that we are on the cusp of a ‘great rotation’ out of bonds and into equities,” Michael Hartnett, the chief investment strategist at BofA Merrill Lynch Global Research, said. “The only missing ingredient is a resolution to the U.S. fiscal cliff.”

The survey also revealed that there was a significant shift in November from bonds into equities. A net 35 percent of fund managers, a 16 month high, were overweight stocks, an increase from 24 percent in October and 15 percent in September. A net 35 percent of managers were underweight bonds in November, the lowest reading in seven months.

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