Bank of America Asia Fund Manager Survey: The pendulum is swinging back

The Zhitong Finance App learned that Bank of America Securities released a survey report on Asian fund managers, saying that Asian investor sentiment showed a typical trajectory of “joy - fear - recovery.” Survey participants expect the market to usher in a profit-led recovery, with nearly 90% believing that the market level will be higher after a year. However, the market consensus profit expectations do not seem too optimistic, which leaves room for future upward revisions. In terms of industry preferences, the fund manager survey has revived an optimistic view of the semiconductor cycle, with 38% of net investors (the highest level in a year) expecting it to strengthen over the next 12 months.

Bank of America Securities's main views are as follows:

Economic growth recovery

Over the past six months, investor sentiment has followed a typical trajectory: first joy, then panic, and finally recovery. The latest Fund Managers Survey (FMS) data confirms this emerging optimism. The improvement in economic growth prospects stems from investors' confidence in the rapid resolution of trade issues and coordinated global monetary easing (80% of the 34 major central banks are cutting interest rates).

Currently, 46% of net investors expect the global economy to weaken, which is a significant improvement compared to 82% in April; while net 45% of investors expect the Asian economy to weaken, which is also an improvement from 89% in April.

Potential for profitable upgrades

Unsurprisingly, participants expect the market to usher in a profit-led recovery, with nearly 90% believing that the market level will be higher after a year. Net 3% of investors expect profits to pick up, a complete shift from what 78% of people expected in April to slow profits.

Furthermore, compared to recent months, the market-agreed profit expectations do not seem overly optimistic, leaving room for future upward revisions.

Japan returns to the top

Net 21% of investors expect the Japanese economy to strengthen, while net 26% of investors expect the Japanese economy to weaken in April. As panelists focus on corporate reforms, foreign exchange trends, and profit conditions to determine market trends, return expectations are now close to historical averages.

In terms of country allocation, after falling to second place for a month, Japan once again became the most popular market, followed by India. South Korea jumped from low rank to the third most popular market, as investors pinned their expectations on policy reforms initiated by the country's new leadership, and the market experienced a sharp rebound, which usually happens after a period of emotional release. Thailand and Indonesia remain the least favored markets.

Industry preferences

In Asian portfolios other than Japan, participants overcapitalized on technology stocks while avoiding the energy, materials, and real estate sectors. The fund manager survey has revived optimism about the semiconductor cycle, and 38% of net investors (highest level in a year) expect it to strengthen over the next 12 months.

In Japan, banks that benefit from rising interest rates are still the first choice, followed by the semiconductor industry. Investors still prefer the value style, but to a lesser extent than before.

Artificial intelligence (AI) is still by far the most popular topic in China. In India, IT services, followed by infrastructure and consumption, are the main topics investors are paying close attention to.

Some of the charts are as follows:

Chart 1: Asia-Pacific (excluding Japan) and global economic growth expectations are showing a recovery trend

Net percentage of investors surveyed by fund managers who expect the global/Asia-Pacific (excluding Japan) economy to strengthen

Chart 2: Inflation expectations are still close to historic lows. Net 28% of participants expect inflation in the Asia-Pacific region (excluding Japan) to decline in the next 12 months

Net percentage of investors surveyed by fund managers who expect inflation in the Asia-Pacific region (excluding Japan) to rise in the next 12 months

Chart 3: Return expectations for Asia-Pacific (excluding Japan) stocks pick up as growth expectations improve

Fund manager survey views on Asia-Pacific (excluding Japan) stocks over the next 12 months