The world’s largest fund managers are shifting away from Asian stocks in the first quarter over inflation concerns in favor of North American equities on an improving economic outlook, an HSBC Holdings PLC survey said.
Half of the fund managers have a positive outlook on non-Japan Asian stocks, down from 75 percent in the fourth quarter, according to the quarterly survey. All of the 12 houses, which manage a total of US$3.98 trillion in assets, or 16 percent of global funds under management, are bullish about North American equities, up from 25 percent in the fourth quarter.
Investors had added capital to funds investing in Asia-Pacific stocks outside of Japan from the first quarter of 2009 until the third quarter of last year, according to HSBC data. Yet such funds have seen outflows since the fourth quarter as frequent central bank actions heightened concerns about imported inflation and rising interest rates, said Bruno Lee (李錦榮), HSBC’s Hong Kong-based Asia-Pacific head of wealth management.
“Fund managers are looking to North American equities because of improving economic conditions, merger and acquisition activities and encouraging company reports,” Lee added. “Fund managers are lukewarm on Asia-Pacific ex-Japan due to concerns over rising inflation in the region and less bullish on Greater China equities as the market takes in the impact of ongoing austerity measures to contain inflation.”
Forty-three percent of the fund managers are neutral toward Greater China stocks, 10 percentage points higher than the fourth quarter, as tightening measures and credit control policies have damped investor enthusiasm, the HSBC survey said.
Investor sentiment is changing from the fourth quarter, when Greater China stock funds drew US$2.2 billion of new capital on economic growth, according to the HSBC survey.
The survey was conducted before the largest earthquake on record in Japan.
“There’s still an awful lot of uncertainty,” Lee said of the Japan earthquake’s impact. “We would not be surprised to see short-term volatility and swings.”
Investors will now need to -reassess whether improving export outlooks and corporate earnings that lifted sentiment toward Japanese stocks before the March 11 earthquake could continue, he added.
“From a relative valuation stand point, it’s obviously made Japan even more attractive,” he added.
Twenty-five percent of the fund managers polled were underweight Japanese stocks, compared with 78 percent in the fourth quarter. The percentage bullish about Japanese stocks rose to 38 percent from zero, the survey said.
All fund management companies polled, including BlackRock Inc, Fidelity Investment Management and Franklin Templeton Investments, have turned bullish about Asian bonds this quarter, up from 60 percent in the fourth quarter, it added.
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