According to a recently concluded Reuters Poll, the British investors have continued to cut the cash and therefore increase their exposure to the equities of the Euro zone, in November, 2012. They are actually picking up stocks oversold as they are panicked because of the debt crisis. In November, the average exposure to cash in global balanced portfolios saw a surge of 5.6% (It was 6.1% in October). Since March, the cash allocations are at the lowest level currently. The poll also stated that investors have allocated most of the money to the bonds (28.6%). The investments for property and alternative assets were of 2.9% and 12.2% respectively. In the poll, the bond buying plans of European Central Bank was marked as the highlight event for changing the sentiments of investors.
Alec Letchfield, who works as the chief investment officer for UK Health Department of HSBC Global Asset Management, stated that the OMT Program announcement made by ECB in last summer helped to remove a good amount of near-term tail risk off the disintegrated Euro zone. It helped to ease the market concerns on the long term as well. The equities were being overweighed before the announcement. After the news surfaced, the level of conviction among investors increased further. However, they believe that the financial crisis in Europe is far from over and the next steps should be taken carefully.
In the poll, the British investors however raised their concern over complacency. Particularly, the so called fiscal cliff was discussed in the poll with much importance. According to some, even if the fiscal cliff is postponed for the time being, the fiscal adjustments cannot be avoided altogether. Hence, in 2013, US can experience a severe economic drag and that will cause harm to the British market as well. There are others who think that the decisive win for Obama in the Presidential elections had made the opposition weak and hence, the fiscal problem can be resolved in an orderly manner.
The economic slowdown of Chinese economy was also analyzed by British investors through the poll. Many are concerned over the policies that will be implemented by the new leaders of this Communist ruled country. Andrew Milligan, Standard Life Investments’ Global Strategy Head stated that the reform program outline for this Asian powerhouse is yet to be settled creating negative sentiments.