Investors keep stock holdings high in July

LONDON: Investors around the world kept their exposure to equities high in July, buoyed by bullish economic data on the global economy, but Japanese investors worried that higher US interest rates could hurt stocks.

Reuters surveys of 44 leading investment companies in the United States, Japan, continental Europe and Britain, showed an average portfolio holding of 60.6 percent in equities and 32.4 percent in bonds. This represented a slight shift from 60.8 percent and 32.0 percent, respectively, in June which was mostly due to moves by Japanese investors.

US, continental European and British fund managers all reported slightly higher equity holdings, which would be consistent with rising stock markets and surprsingly positive US economic data in the month.

“We would have to see some real disappointments in the global economy and it would have to do a lot worse than we were expecting for us to believe that equities are not as attractive as we think they are”, Steven Bleiberg, head of global investment strategy at Citigroup Asset Management. Japanese investors, who make up around a quarter of the global sample of the poll, expressed concerns that China’s revaluation of its yuan currency could force up US rates, weighing on global stocks.

Higher bond yields abroad, meanwhile, attract Japanese investors in particular because their own domestic overnight interest rates are nearly zero.

Regionally: US fund managers maintained high levels of stock holdings in July, attracted by higher returns on equities compared with long-term debt yields.

The poll of US investors showed 67.2 percent of portfolios in equities, up slightly from 67.1 percent in the June survey. Bond exposure was steady at 25.6 percent in July while cash allocation edged lower to 4.0 percent from 4.2 percent the previous month.

Strategists said that with the global economy doing well, bonds were not as attractive as equities. European fund managers’ holdings of stocks also rose slightly in July.

The survey of continental European managers showed equities at 50.7 percent from 50.4 percent in June, while bonds rose to 40.5 percent from 39.8 percent and cash fell to 4.1 percent from 5.2 percent. A strong rally in US equity markets in July raised US stocks to 45.9 percent of total equity holdings from 41.0 percent, but euro zone equity holdings fell to 26.9 percent from 32.5 percent.

The move was driven partly by a significant shift by one large fund in the sample. reuters

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