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REPEAT: BOA Merrill Fund Survey: NK Tops Tail Risk; EQ Hedged

MNI (London)
Repeats Story Initially Transmitted at 14:37 GMT Sep 12/10:37 EST Sep 12
--US Stock Underweight Largest Since Nov 2007
By Vicki Schmelzer
     NEW YORK (MNI)   - North Korea uncertainty rose to the head of the list of
top "tail risks" in September, with global investors increasingly hedging their
equity holdings as a result, according to the findings of Bank of America
Merrill Lynch's monthly fund managers survey, released Tuesday. 
     A net 34% of portfolio managers polled in September said North Korea was
the biggest tail risk, versus a net 21% who said "Fed/ECB policy mistake" and
15% who said "Chinese credit tightening."
     In August, the "biggest tail risks" were "Fed/ECB policy mistake" at 22% of
those polled, "Crash in global bond markets" at 19% and "North Korea" at 19%. 
     North Korea jitters caused more investors to hedge their stock portfolios. 
     "Only a net 27% have not bought equity hedges; the 9 ppt increase in
hedging is the largest jump in 14 months," the BOA Merrill Lynch survey said. 
     At the same time however, FMS cash holdings fell to 4.8% this month from
4.9% in August and July, but remained above the 4.5% average of the last 10
years. 
     And there would appear to still be those willing to take risk. 
     In terms of the "most crowded trades" in September, a net 26% of managers
said "long Bitcoin," a net 22% said "long Nasdaq" and a net 21% said "Short U.S.
Dollar." 
     In August, the "most crowded trades" were "Long Nasdaq" at 31%, "Short U.S.
Dollar" at 21% and "Long Eurozone Equities" at 16% of those polled. 
     The survey noted that Bitcoin, the cryptocurrency, was trading near $5,000
and was up 344% year-to-date at the time of writing. 
     When asked how the global real economy would develop over the next 12
months, a net 25% of those polled looked for faster global growth, down from 35%
in August and 38% in July. 
     Back in January, when U.S. Treasury yields were near their peaks, a net 62%
of fund managers polled looked for faster growth. 
     The September economic growth reading was the lowest since October 2016,
before the U.S. election in November. 
     On asset allocation, a net 34% of fund managers polled said they were
overweight global equities, versus a net 36% overweight in August and a net 38%
overweight in July.
     A net 55% of portfolio managers were underweight bonds in September, versus
a net 59% underweight in August and a net 55% in July.  
     A net 4% of managers were underweight commodities this month, compared to a
net 9% underweight in August and a net 6% underweight in July. 
     Looking at gold, a net 1% of those polled in September saw it as
undervalued, versus a net 7% with that view in August and a net 12% with that
view in July. 
     In terms of regional equity allocation, a net 28% of those polled were
underweight U.S. stocks in September, versus a net 22% underweight in August and
a net 20% underweight in July. 
     "The last time the underweight in U.S. stocks was larger was in November
2007," the survey said. 
     A net 54% of managers were overweight eurozone equities in September,
compared to a net 56% overweight in August and a net 54% overweight in July. 
     Allocation to emerging market equities rose to a net 47% overweight this
month. 
In August, a net 39% of fund managers were overweight EM stocks and in July, a
net 37% were overweight EM stocks. 
     A net 12% of managers were overweight Japanese stocks, versus a net 20%
overweight in August and a net 18% overweight in July. 
     UK stocks continued to be shunned. A net 35% of those polled were
underweight UK equities, versus a net 37% underweight in August and a net 30%
underweight in July. 
     On the FX front, a net 23% of portfolio managers said the dollar was
undervalued this month, up from a net 19% with that view in August and a zero
reading in July. The September reading was the highest since December 2014, the
survey said. 
     An overall total of 214 panelists, with $629 billion in assets under
management participated in the BOA Merrill Lynch survey, taken Sept 1 to 7. 
     "181 participants with $549bn AUM responded to the Global FMS questions and
101 participants with $241bn AUM responded to the Regional FMS questions." the
survey said.
--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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