Survey Finds Improved Market Conditions, Fears For Economy

By Agence France-Presse Managers of global investment funds say market conditions are steadily improving but remain pessimistic about prospects for a healthier world economy, according to a survey by Merrill Lynch, New York. Merrill Lynch says its stock market conditions indicator (SMC) shot up from 13.9 in September to 15.8 in October, its highest level in 11 months. The indicator, which measures fund managers' assessments of profit expectations, interest rate prospects, equity valuations and investor sentiment, has now risen for two straight months. "On paper, the fund manager survey looks like good news, but is it?" asks David Bowers, Merrill Lynch chief global investment strategist. "Institutional investors say that stock markets are undervalued and interest rates will come down, which are positive signs. "However, we may be facing a weakening nominal sales environment that would make the market look negative," he says, adding that the outlook for corporate earnings has taken a turn for the worse. The survey also showed that 37% of respondents in October expected a stronger global economy, down from 48% last month. Elsewhere the study revealed that inflation fears have evaporated, with managers having higher expectations for lower interest rates. Institutional investors prefer equities in emerging markets to those in the United States and cite Japan as offering the "worst" prospects for corporate profit, according to the survey, which found that Britain was seen as having the best equity investment opportunities. Half the panel of 311 fund managers interviewed say global equities are undervalued, with 29% seeing the market as undervalued by 15% or more. Copyright Agence France-Presse, 2002