Global investors see Chinese green shoots
The world's fund managers have begun to glimpse the first green shoots of recovery and are betting that a powerful rebound in China will revive demand for commodities and lead global industry out of slump.
By Ambrose Evans-Pritchard
Last Updated: 8:46PM GMT 18 Feb 2009
Investors are betting on some green shoots of recovery in China
The latest Merrill Lynch survey of investors shows the highest level of optimism since the credit crunch began, fuelled by tentative hopes that the global cycle is slowly starting to turn.
Michael Hartnett, emerging market strategist at Bank of America Securities-Merrill Lynch, said fund managers had jumped on early signs that China is through the worst.
"China is the one place where policy seems to be working. Credit and the money supply are both growing, and the local equity markets are going through the roof," he said. "There is a feeling they may just be able to pull a rabbit out of the hat."
However, he added: "We think China is a very narrow base for optimism."
The OECD's leading indicators still point down, raising the risk of fresh disappointments for the over-eager. Merrill said oil and industrial commodities are coming back into favour as "a pure way" of playing China's growth without having pick through company balance sheets. But there is a rising suspicion that gold has risen too far, too fast.
Once again, Europe is viewed as the world's "sick man", with a net 70pc of investors expecting the economy to get worse over the next year. The number overweight in cash has risen to 53pc, the highest since the dotcom bust in 2001.
But things may be looking up for Britain.
Gary Baker, head of the region's equity strategy, said sterling's slide is a tonic for stocks listed in London. "A lot of sterling assets are in energy, materials and metal-bashing. These are starting to look very attractive," he said.
The world's fund managers have begun to glimpse the first green shoots of recovery and are betting that a powerful rebound in China will revive demand for commodities and lead global industry out of slump.
By Ambrose Evans-Pritchard
Last Updated: 8:46PM GMT 18 Feb 2009
Investors are betting on some green shoots of recovery in China
The latest Merrill Lynch survey of investors shows the highest level of optimism since the credit crunch began, fuelled by tentative hopes that the global cycle is slowly starting to turn.
Michael Hartnett, emerging market strategist at Bank of America Securities-Merrill Lynch, said fund managers had jumped on early signs that China is through the worst.
"China is the one place where policy seems to be working. Credit and the money supply are both growing, and the local equity markets are going through the roof," he said. "There is a feeling they may just be able to pull a rabbit out of the hat."
However, he added: "We think China is a very narrow base for optimism."
The OECD's leading indicators still point down, raising the risk of fresh disappointments for the over-eager. Merrill said oil and industrial commodities are coming back into favour as "a pure way" of playing China's growth without having pick through company balance sheets. But there is a rising suspicion that gold has risen too far, too fast.
Once again, Europe is viewed as the world's "sick man", with a net 70pc of investors expecting the economy to get worse over the next year. The number overweight in cash has risen to 53pc, the highest since the dotcom bust in 2001.
But things may be looking up for Britain.
Gary Baker, head of the region's equity strategy, said sterling's slide is a tonic for stocks listed in London. "A lot of sterling assets are in energy, materials and metal-bashing. These are starting to look very attractive," he said.
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