BofA Merrill Lynch Fund Manager Survey Finds Investors Looking to Buy American

U.S. Equities Thrive as Eurozone Loses Support

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NEW YORK & LONDON–(BUSINESS WIRE)– U.S. equities are the primary beneficiary of the continuing upswing in global investor sentiment, according to the BofA Merrill Lynch Survey of Fund Managers for December.

A net 44 percent of the respondents predict the world’s economy to strengthen in 2011, compared to 35 percent a month earlier. A net 51 percent anticipate corporate profits improving next year, up from 36 percent in November. At the same time, more investors believe that inflation is likely to rise with a net 61 percent of the panel forecasting higher core inflation in 2011.

With Europe’s sovereign debt crisis continuing, investors are turning to U.S. equities. A net 16 percent of asset allocators are overweight U.S. stocks up from a net 1 percent in November. A net 4 percent are underweight eurozone equities, compared with a net 15 percent overweight in November. Bullishness towards the U.S. dollar is evident with a sharp increase in the number of investors forecasting dollar appreciation. A net 36 percent expect the dollar to make gains in 2011, up from a net 14 percent in November. In the U.S. regional survey, the net percentage of U.S. investors expecting double-digit profit growth has doubled month-on-month to 40 percent.

“Despite rising confidence in global growth, the survey shows that Europe is losing investor support as political procrastination and banking concerns overshadow a strong corporate outlook,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research.

“The pending new tax deal in the U.S., combined with QE2, has restored confidence in the prospects of U.S. companies, at a time that Europe is out of favor and investors are questioning Chinese growth prospects,” said Michael Hartnett, chief Global Equity strategist at BofA Merrill Lynch Global Research.

Corporates urged to step up investment

Global investors are giving corporates the green light to step up capital expenditure. A net 62 percent of the panel say that companies are broadly under-investing – the highest such reading since the Fund Manager Survey started posing the question in August 2005.

Investors’ number one preference for use of cash has switched to capital spending with 45 percent of the panel prioritizing it. In November “returning cash to shareholders” was top choice. Investors are also increasingly convinced that companies should borrow more. A net 44 percent of respondents believe corporate balance sheets are under leveraged, compared with a net 41 percent in November.

Technology loses number one sector status after 11 months

Energy has dislodged Technology from its pedestal as the world’s favorite stock sector for the first time in a year. Technology had been the top pick for 11 consecutive months since January. A net 38 percent of asset allocators are overweight Energy, up sharply from a net 24 percent in November. A net 34 percent of the panel is overweight Technology, a monthly fall of one percentage point. A second large gainer was Materials, with an extra 8 percent of respondents moving to overweight positions. Both Energy and Materials are sectors that traditionally benefit from rising inflation.

Banks lost further ground, with a net 28 percent of global investors underweight the sector. European investors were especially fast to move out of Bank stocks. A net 47 percent of European respondents are now underweight Banks, up from a net 22 percent in November.

Europeans remain positive in face of sovereign debt crisis

Aside from their mass movement out of financial stocks, European investors are keeping cool heads. A net 26 percent of European respondents expect the region’s economy to improve in 2011, up from a net 23 percent in November. A net 34 percent are forecasting earnings per share to grow next year, compared with a net 29 percent a month previously.

Cash holdings in the region have ticked upwards, but only modestly, with average cash positions up by 0.1 percent to 3.0 percent of a portfolio month-on-month. “Europeans are looking beyond the noisy process of politics, but believe that a solution to the sovereign debt crisis will be found, and that economic growth and corporate profits will progress in the coming year,” said Patrik Schöwitz, European equities strategist at BofA Merrill Lynch Global Research.

Survey of Fund Managers

A total of 209 fund managers, managing a total of US$569 billion, participated in the global survey from 3 December to 9 December. A total of 174 managers, managing US$401 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Research with the help of market research company TNS. Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.

The BofA Merrill Lynch Global Research franchise covers over 3,200 stocks and 880 credits globally and ranks in the top tier in many external surveys. Most recently, the group was named 2010 Top Global Broker (second consecutive year), Top Europe Broker, No. 2 U.S. Broker and No. 3 Asia broker by Financial Times/StarMine. The team was also named Best Brokerage by Forbes/Zacks for the second consecutive year.

In addition, the group was named No. 1 in the 2010 Institutional Investor All-Emerging Europe and All-Latin America Research team surveys and No. 3 in the 2010 Institutional Investor All-America Equity, All-America Fixed Income and All-Europe Research team surveys. The group was also the winner of the Emerging Markets’ magazine EM Research Global Award for 2010.

Bank of America

Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company provides unmatched convenience in the United States, serving approximately 57 million consumer and small business relationships with approximately 5,900 retail banking offices and approximately 18,000 ATMs and award-winning online banking with 29 million active users. Bank of America is among the world’s leading wealth management companies and is a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world. Bank of America offers industry-leading support to approximately 4 million small business owners through a suite of innovative, easy-to-use online products and services. The company serves clients through operations in more than 40 countries. Bank of America Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial Average and is listed on the New York Stock Exchange.

Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a registered broker-dealer and a member of FINRA and SIPC, and, in other jurisdictions, locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value * Are Not Bank Guaranteed.

www.bankofamerica.com

Reporters May Contact:Rinat Rond, Bank of America, 1.646.855.3152
rinat.rond@bankofamerica.com
Tomos Rhys Edwards, Bank of America, +44.20.7995.2763
tomos.edwards@baml.com

Source: BofA Merrill Lynch