Investors Stock Upon Equities

WEALTH CREATION

LONDON: Investors added equities and reduced allocation to bonds and cash in December as growing confidence in the global economic recovery into 2010 prompted them to buy risky assets, polls showed yesterday.

Monthly surveys of 50 investment houses in the US, continental Europe, Britain and Japan showed equity holdings rose to 56.2 per cent of their portfolios in December, after a decline in November to 55.3 per cent.

This is still below their long-term average of just over 59 per cent. Equity allocation hit a year high of 57.1 in August.

Bond holdings - which include government and corporate paper - fell to 33.8 per cent this month from 34.7 per cent in November while cash ticked lower to 4.4 per cent from 4.5 per cent.

The surveys were collected just after world stocks, measured by MSCI, extended gains to a 15-month high.

"The thinking behind our moderate overweight in equities is fundamental. ... We believe the economy is moving and turning higher in 2010," said Alan Gayle, senior investment strategist at RidgeWorth Investments in Atlanta.

Concerns about potential defaults by Dubai's state-owned conglomerate Dubai World, which increased risk aversion last month, eased after a surprise US$10 billion (US$1 = RM3.44) lifeline from Abu Dhabi.

This helped maintain strong investor appetite in emerging market bonds and stocks.

"The world economy is still recovering. We have seen problems in Dubai... but they are unlikely to pose systemic risks to global financial markets," said Yoshinori Nagano, senior strategist at Daiwa Asset Management in Tokyo.

Regionally US fund managers rebuilt their equity holdings to their highest level this year.

Based on 11 US-based fund management firms, firms held an average of 65 per cent of their assets in equities, compared with 62.6 per cent a month earlier.

They decreased cash holdings to an average of 2.1 per cent of their assets, compared with 2.7 per cent in November, while they scaled back exposure in bonds to 29.5 per cent.

Fund managers in continental Europe boosted cash for the second straight month in December and added more equities.

The survey of 15 investment houses in the region showed equity holdings rose to 47.9 per cent of their portfolios this month - their highest in at least a year - from 46.9 per cent in November.

Bond holdings - which include government bonds as well as corporate bonds - fell to 40.6 per cent from 41.1 per cent last month. Cash holdings rose to 5.9 per cent from 5 per cent, their highest since June.

In Japan, fund managers raised the average weighting of global bonds in their model portfolios for the first time in six months in December, attracted by rising debt yields.

The poll of 12 fund managers showed their average bond allocations rising to 43.9 per cent from 43.3 per cent in November.

Their stock weightings also inched up to 51.5 per cent from 51.4 per cent while cash weightings slipped to 4.5 per cent from 5.3 per cent.

British fund managers continued to build positions in alternative investments, with allocation to this asset class rising to 11.8 per cent in December, from 11.1 per cent in November.

The increase marks the seventh consecutive month of growth in allocations to alternative asset classes. - Reuters