Asia-Pacific fund managers are turning even more bullish on regional stocks, as optimism increases over mainland economic growth prospects. According to the latest monthly Merrill Lynch-Gallup survey of Asian fund managers representing about US$237 billion under management, a record 61 per cent of respondents are expecting a stronger mainland economy over the next 12 months. This is even as 89 per cent believe the Chinese yuan will eventually depreciate substantially, if not next year, then sometime afterwards. Eleven per cent of those surveyed believe a devaluation can happen even before the year is out. An overwhelming majority of fund managers also believed that Asia - outside Japan and the mainland - would recover sharply in the coming year, and as a consequence were planning to cut low cash levels even further, Merrill Lynch said. 'Asia-Pacific cash levels are low, around 4 per cent, but fund managers planning to cut their cash outnumber those planning to raise it by 30 per cent,' said the United States investment bank. Electronics stocks are benefiting most from the renewed bullishness, which translates into good news for the stock markets of Hong Kong, the mainland and Taiwan. 'In the past, similar increases in buying interest for Asian stocks have corresponded to rallies in the Hang Seng Index,' said Merrill global strategist Trevor Greetham. 'The increase in Asian economic optimism could be a result of an easing of fears of a hard landing in the US.' Only 74 per cent of fund managers in the region now expect US interest rates to rise in the next 12 months, down from 86 per cent in August. In the region, excluding Japan, the biggest swings in sentiment were seen in Australian and Hong Kong shares, with both seeing bulls outnumbering bears by 22 per cent this month, compared with 4 per cent and 9 per cent, respectively, last month.
