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Investors Buy Euro Assets, Cut US Bond Exposure

Thursday, 31 Oct 2013 11:51 AM

Global investors continued to buy into the eurozone economic recovery story in October, increasing their exposure to both the region's equities and bonds, a Reuters poll showed.

Investors boosted their holdings of eurozone equities for the fourth month in a row to the highest since February last year, and their bond holdings to the highest since September 2011. Conversely, the high degree of volatility sparked by the U.S. government shutdown and fears a breach of the country's debt limit might trigger a default pushed investors' holdings of U.S. bonds to the lowest since September 2011.

A total of 53 fund managers took part in the Reuters global asset allocation poll for October, which was conducted Oct. 16-30. That period encompassed the unofficial Oct. 17 deadline set by the U.S. Treasury to raise the country's borrowing limit, which Congress met just in time. The 16-day partial government shutdown also ended on Oct. 16.

As uncertainty surrounding the U.S. outlook increased in October, so did the cautious optimism surrounding the eurozone where a gradual, if bumpy, improvement will help bolster the global economic recovery and investment climate.

"The low interest rate environment continues to be supportive for corporate earnings and the overall economic trend is positive despite some mixed data," said Boris Willems, strategist at UBS Global Asset Management.

On a global level, however, investors trimmed their exposure to equities for the first time in four months. They held 50.5 percent of their global balanced portfolio in stocks, compared with 50.9 percent in September. Within the equity universe, investors increased their allocations to the eurozone to 17.7 percent from 17.3 percent, and increased their U.S. holdings to 42.2 percent from 41.7 percent.

Fund managers' holdings of bonds inched up to 36.7 percent from 36.6 percent in September. The regional breakdown showed a marked divergence between the eurozone and United States. They ramped up their eurozone holdings to 28.3 percent from 27.4 percent, but slashed their U.S. and Canadian bond holdings to 35.6 percent from 37.5 percent. That was the biggest cut since March last year.

The poll showed investor appetite for emerging markets held up well, perhaps a surprise considering many of these economies are slowing. This was most notable in emerging Europe, where equity holdings rose to 2 percent from 1.6 percent.

Global investors increased their exposure to U.S. equities in October. U.S. investors trimmed their exposure to global equities to the lowest since before the global financial crisis began in 2007. With stock indexes at record highs, U.S. fund managers scaled back their recommended equity allocations to 55.9 percent in October. At the same time, they upped their aggregate cash weightings in balanced portfolios to 3.8 percent, the highest since November 2012.

© 2017 Thomson/Reuters. All rights reserved.

 
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Global investors continued to buy into the eurozone economic recovery story in October, increasing their exposure to both the region's equities and bonds, a Reuters poll showed.
bonds,assets,euro,stocks
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2013-51-31
Thursday, 31 Oct 2013 11:51 AM
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