Global investors see equities as undervalued, according to Merrill survey

Investors are waiting for the right conditions to return to equity markets amid the most pessimistic outlook yet recorded, according to Merrill Lynch\'s latest survey of fund managers. The survey of 172 fund managers which was carried out between 3-9 October saw the number of respondents who believe equities are undervalued reached a 10-year high of 43%. \"Fund managers are waiting for the triggers that will give them the confidence to buy. What they are looking for is a loosening of monetary conditions and for 3rd quarter earnings to clarify where problems and opportunities lie across equity markets,\" said Gary Baker, head of EMEA equity strategy at Merrill Lynch. Third quarter earnings season will be a vital input to investors\' portfolio decision making and to gauging how the financial crisis has impacted the real economy. Respondents appear to be placing little or no credibility in consensus earnings estimates for the year ahead. A net 92% of respondents regard estimates as \"too high,\" and more than half say estimates are \"far too high\". But despite the hope that undervalued equities could provide the foundation for a rally, about seven out of 10 respondents are of the view that the global economy has entered recessionary times, up sharply from 44% one month ago. US fund managers are now much closer to fully accepting what they expect will be a deep and prolonged US recession. \"In our view, however, it is too soon to say we have reached a bottom in equity markets given the current financial market turmoil,\" said Sheryl King, senior US economist at Merrill Lynch. Growing risk aversion has led to a record 49% of respondents who are overweight in cash positions.

yeah, when newspaper headlines scream abt a raging bull market, u know the end is near. likewise, when headlines are filled with horrors of the market, u know the bottom is near - or already here. likewise, when pictures of dead bulls get circulated.....

STANDARD & Poor\'s (S&P) expects Asian markets to rebound next year on the back of a healthier banking system and lower corporate and financial-system gearing. \'There is limited de-leveraging to be undertaken in Asia and, thus, the absence of prolonged financial-system restructuring,\' said Lorraine Tan, head of S&P equity research in a report launched on the Asian market outlook. She told a media conferences that regional stock market could see range-trading over the short term and re-test the October lows, adding that \'2009 is likely to be a market of two halves\'. \'We suspect that first-quarter 2009 is likely to reveal ugly corporate performances and this may dampen sentiment in first-half 2009,\' she said in the report. \'With economic growth anticipated to rebound in second-half 2009, we believe that equities are likely to have a strong fourth- quarter 2009 as the recovery becomes apparent and investors begin to re-rate stocks upward.\' Based on a comparison with the 1987-1988 market downturn, S&P expects the Hang Seng (HSI) index to hit bottom in 13-20 months\' time. The HSI is targeted to hit 15,000 points at the end of this year, wrote Ms Tan, and could hit 21,000 points at end-2009. S&P also favours China and Hong Kong as their economies are showing more resilience compared with the other Asian markets, wrote Ms Tan, who viewed both markets as \'overweight\'. Most of the other regional markets are viewed by S&P as \'neutral\'. She put an end-2008 target for Singapore\'s Straits Times Index at 2,000 points and the end-2009 target at 2,300 points.

Global Stocks Will Rally as Prices Hit ‘Extreme’ Lows, RBS Says Email | Print | A A A By Alexis Xydias Nov. 28 (Bloomberg) -- Investors should exploit the “extreme opportunity” presented by stock valuations that have overestimated the extent to which earnings will slump, according to strategists at Royal Bank of Scotland Group Plc. While European earnings may decline a further 18 percent, current equity prices suggest the market is predicting a 45 percent drop, Ian Richards and Graham Bishop, strategists at RBS in London, wrote in a report today. U.S. earnings may contract another 15 percent, they wrote. “Risk premia have hit extreme, and unsustainable, highs,” they wrote. “This has driven valuations to extreme lows.” The price of European equities relative to trailing earnings may almost double as investors attempt to anticipate the bottom of the recession, according to the report. “We look for the U.S. economy to lead recovery through the second half of 2009,” the note said. “Markets invariably pre- empt economic recovery and we expect equities to rise substantially.” To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.

Dec. 8 (Bloomberg) -- Stocks in Europe and Asia rallied, led by mining and oil shares, and U.S. index futures rose after U.S. President-elect Barack Obama pledged the largest infrastructure- spending package since the 1950s to revive the economy. Obama’s spending plan “is important in terms of it being another sign that policy response is ongoing and we should expect to see more from authorities through 2009,” said Robert Talbut, who helps manage $31 billion of assets as chief investment officer at Royal London Asset Management. “That should help restore confidence in equity markets.” HANG SENG INDEX UP 1,198.78 POINTS WHICH IS 8.66%!!!

The MSCI Asia Pacific Index added 1.3 percent to 87.54 as of 3:42 p.m. in Tokyo, extending a four-day, 8.7 percent gain. The index has rallied 16 percent since reaching a five-year low on Nov. 20 as governments from Australia to South Korea took steps to protect their economies from the financial crisis. “Sentiment is very fragile now and if the U.S. fails to pass the bailout, it will have a damaging impact on investors who are slowly gaining back some confidence,” said Nader Naeimi, a Sydney-based senior investment strategist at AMP Capital Investors, which manages about $85 billion. “What’s positive are significant rate cuts around the world and the stimulus plans being put in place.”