Fund managers upbeat about shares

A recent survey of 286 fund managers by Merrill Lynch has found that managers are becoming increasingly optimistic about stockmarkets' future. The survey also found that the IT sector is still regarded as overvalued despite large falls, consumer staples are seen as overvalued and the financial sector is regarded as the most undervalued. Managers see funds being most underweight in the global utilities sector and most overweight in the pharmaceutical and healthcare sectors.

The poll, conduced between October 31 and November 7, found a significant move among managers away from defensive stocks to cyclical stocks with no increased preference for small cap stocks over large. Managers see future profits coming from a 3 per cent growth in GDP in the G7 countries. UK and global emerging market stocks were the top choices of the managers. But they predict difficulty in lifting earnings over the next 12 months in the face of weak sales growth. Three quarters of respondents believed that earnings will have to be driven by cost-cutting over this period.