Funds love techs, Media, telecoms

LONDON, Jan 19: Investors the world over love telecommunications, media and technology (TMT) stocks, according to the Merill Lynch Gallup Survey of global fund managers for January released yesterday, reports Reuters.

The TMT love affair was revealed when for the first time in its 10-year history, the monthly survey asked investors to list their favourite and least favoured sectors.

Fully 62.2 per cent of funds said they were bullish on the three red-hot growth sectors, with just 5.7 per cent bearish.

At the other end of the scale from the soaring growth stocks were traditional cyclical stocks like mining companies and building material suppliers as well as tobacco companies, utilities and airlines.

Growth stocks are in industries which investors believe have strong potential for long-term growth while the fortunes of cyclical industries are closely tied to overall economic growth.

Trevor Greetham, global strategist at Merrill Lynch said investors seemed to have no fears over soaring TMT share valuations which have been rising through most of the second half of last year.

"People are very keen to buy these shares. Partly fund managers are acting as momentum investors here," he said.

However he cautioned that if the central banks actually raised interest rates this year as the survey forecast, then the consequent reduction in market liquidity could take interest away from the sectors.

The survey found bulls outnumbered bears globally of hi-tech shares by 21.2 per cent, while there were 20.5 per cent more bulls of telecommunication shares and 14.8 per cent more bulls than bears of media shares.

The survey also found that investors expected the US and British economies to slow this year but expected firm growth in Europe and accelerated growth in Japan and South Africa.

US fund managers were most concerned that their equity markets were overvalued and were also most bearish on their companies' profit prospects compared with the other regions.

The US managers expected a further 50 basis points to be added to short term interest rates by the Federal Reserve Board to be enough to cool the economy this year.

They forecast a GDP growth rate of 3.3 per cent this year falling to 2.7 per cent in 2001.

"The expectation that the US economic expansion will continue for the foreseeable future may explain why 68 per cent of fund managers chose growth stocks as their favourite broad sector on a year's view," the survey noted.