Fund managers around the world have signalled an increasing reluctance to buy Pacific Basin equities, following last month's increase in United States interest rates. According to the monthly Merrill Lynch Gallup survey of fund managers from Japan, the US, continental Europe, and Britain, all have signalled a growing reticence about increasing their position in the region. 'This probably reflects the historic link between rising Fed Funds and falling equity prices in Hong Kong', the survey said. The index looks set for a battering today following the 2.27 per cent drop in the Dow Jones Industrial Average during Friday's trading. The Dow finished with a loss of 148.36 points at 6,391.69. A pessimistic outlook is virtually universal amongst all those polled by Merrill Lynch, apart from British pension funds, which are historically holding large amounts of cash, and which are eager to invest in world markets. Japanese institutions, responsible for about US$583 billion of assets, are the most bearish on the region, with the survey registering bears outnumbering bulls by a sizeable 23 per cent. This compares with only 5 per cent in March. Turning bearish on global equity markets as a whole, they reported that only 8 per cent of institutions are prepared to increase their holdings this month, compared to 12 per cent in March. Despite this pessimism, over a 12 month view bulls on the region still outweigh bears, and more than doubled to 30 per cent against 14 per cent last month. About 46 US institutions managing US$2.171 trillion of funds, also reported that buying of Pacific Basin equities had dropped sharply. From just under a quarter of fund managers saying they were planning to increase their holdings in March, this month only 4 per cent said they would do the same. On a three month forecast there was an unprecedented equal number of buyers and sellers of Pacific Basin equities, in sharp contrast to last month, when US bulls on the region, outnumbered bears by 15 per cent. Even on a longer term - 12 month view - the survey found that bulls outweighed bears on Pacific basin equities by 48 per cent, compared with 56 per cent in March. Despite this increasingly bearish tone on the region, the survey still noted that against the popular Europe, Australia, Far East (EAFE) benchmark, managers were still slightly overweight on the region, with 13 per cent of portfolios invested, against the recommended 11 per cent weighting. A total of 63 Continental European institutions which are responsible for US$511 billion of assets took a similar, although less stark position on the region, the survey found. Against 13 per cent of fund managers, who said in March they would be buying Pacific Basin equities, only 10 per cent said they would be doing the same in April. Correspondingly on a three month view, bulls outnumbered bears by only 10 per cent, against 23 per cent in March, although the 12 month forecasts showed that bulls on the region still outweighed bears by 37 per cent, marginally down from 38 per cent last month. In Britain, fund managers also signalled their intention to slow their buying of Pacific Basing equities, with only 7 per cent planning to increase their weightings in the region, against 10 per cent last month.