Asset Management What are asset managers thinking about now - Merrill Lynch

According to the latest Merrill Lynch research report, the most commonly held views among fund managers in their survey included the following:

• Expect the economy to get a little weaker over the next 12 months
• Forecast a negatively sloping yield curve
• Think a recession is fairly unlikely
• Think the inflation rate will be slightly lower a year from now
• Feel monetary policy is about right
• Are not sure about the next directional move in the repo
• Forecast the repo rate at 10.5-11.0% in 12 months
• Forecast the 10-year bond yield at 8.5% in 12 months
• Forecast the rand at ZAR8.32/USD in 12 months
• Forecast 12-month All-Share index earnings growth at 15-20%
• Say equities are fairly valued
• Say equities will yield a total return of 15% over the next 12 months, versus a total bond return of 14%
• On a 12-month view are equity and cash bulls; bond and commodity bears
• In the near term, want to maintain their equity, bonds and offshore positions; want to maintain/decrease their cash positions
• See more Buy opportunities
• Are Overweight cash, Underweight equities and bonds, Neutral offshore
• Are Overweight industrials; Neutral resources; Underweight financials
• In the near-term, want to maintain resource and industrial exposure; increase financial positions
• In an international fund, have 16% in local cash, 57% invested in local equities and 9% in local bonds
• In a domestic equity portfolio, have 33%, 23% and 44% invested in resources, financials and industrials, respectively
• In an international fund, have 66% invested in equities
• Are Overweight (in descending order): banks, platinum, telecoms and 'heavy' industrials
• Are Underweight (in descending order): life, general financials, beverages & food producers and gold
• In the near term, want to maintain their positions across all the sub-sectors, except banks (looking to raise exposure)
• Banks, oil and construction are preferred on a 12-month view
• Life, food producers and gold mining are disliked on a 12-month view
• Based on various broad measures, the main assets are ranked as follows: 1st cash, 2nd equities and 3rd bonds
• Based on various broad measures, the main indices are ranked as follows: 1st financials, 2nd industrials and 3rd resources
• On broad measures, banks, oil, retailers & media, telecoms and 'heavy' industrials are preferred
• On broad measures, life, gold and beverages & food producers are disliked
• Managers would buy South African 10-year bonds at a yield of 9.50%
• Expect the equity market to be down in the next three months
• Expect the equity market to be up in six months time
• Expect a -0.5% reduction in GDP growth per annum, due to power shortages
• Think that consensus earnings estimates for the coming year are currently somewhat high