EUROPE - Most European fund managers believe that an American-led war on Iraq would not send global stock markets reeling.
In fact, just under 17% believe that an attack on Iraq may even have a positive impact on market movement.
According to the latest data from ratings agency Morningstar, 59.3% of fund managers think that a war would be only “slightly damaging” to global markets, compared to 14.3% who say that it would be “very damaging”.
The results fall contrary to some recent reports which indicate a general anxiety among fund managers over any potential conflict. A war in Iraq could drive up oil prices that in turn could trigger inflation and send markets plummeting. But any financial impact of a war will relate to how long it lasts, the reports add.
Most of Morningstar’s respondents were also optimistic that markets would rebound at least 10% in one year’s time. Around 52% of managers expect the bounce-back, up from 47% last month. This is despite the fact that the MSCI World index - measured in dollars - was at its lowest level towards the end of September since mid-July 1996.
But even if fund groups themselves are bullish about stockmarket prospects, they seem to expect investors to shun equities, explained Niklas Tell, editor-in-chief of Morningstar Europe.
“New inflow will instead go to fixed income funds and increasingly to balanced funds. Such risk aversion probably accounts for why 425 if fund groups expected guaranteed products to dominate new launches.”
Other findings include 44% of respondents expecting market neutrals to perform best. The favoured region again was Asia (ex-Japan) (54%), with natural resources now the preferred sector (27%). TMTs dropped significantly, with only 14% bullish on the sector, and 33% expecting it to perform the worst.
But Tell warned that investors could be repeating past mistakes by adhering to short-term prospects for equities.
“Avoiding equities at present may not be as damaging as buying Internet funds at the peak of the technology bubble. But if investors only consider recent history when allocating their assets they may fail to achieve their financial targets,” he added.
Morningstar surveyed polled 56 fund management groups, representing E53bn assets under management.
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