British investors cut their equity holdings in March, preferring safer fixed income assets as they saw stock valuations beginning to look stretched, a Reuters poll showed. A monthly poll of 12 UK-based investment managers released on Monday showed equity holdings at a 15-month low of 52.9 percent in March, down from 54.5 percent in February.
Major stock markets have recently seen strong growth, with the S&P 500 index briefly touching a record high on March 21 and the FTSE 100 hitting a 14-year high on February 24, though both have since retreated. "With equity markets now fully valued they need a continual flow of good news to maintain their upward momentum," said Robert Pemberton, investment director at asset manager HFM Columbus.
"But they are now encountering some headwinds - be they geopolitical, such as Ukraine, or more fundamental, such as disappointing growth or corporate earnings numbers." Mark Robinson, chief investment officer at Berry Asset Management, said however it was a matter of time before tensions over Ukraine eased. "We can expect this anxiety to fade as a combination of sanctions and diplomatic solutions are found in the coming weeks," he said.
Investors allocated more to bonds than they had since May 2013 as they sought to reduce risk in their portfolios, with an average allocation of 24.5 percent, up from 22.8 percent in February. "Falling inflation is proving a valuable support for bond valuations," said Pemberton. "At a yield of 3 percent, 10-year bonds in the US and UK don't seem quite so expensive."
The poll, conducted from March 12 to 26, showed British investors had cut their holdings in Japanese equities to a one-year low of 8.2 percent, down from 8.9 percent in February, as the Japanese stock market fell. The Nikkei 225 index is the second-worst performer this year after copper, among global financial markets on a dollar basis, having retreated over 10 percent so far. Meanwhile, confidence in euro zone stocks remained high, staying at 15.9 percent of equity portfolios - the highest since June 2012.