GLOBAL - Investors are putting their cash back to work, following the 25% fall in the oil price, said Merrill Lynch's David Bowers when presenting the findings of the firm's October fund manager survey.

The drop is functioning as a catalyst to force investors back into the market place and "the market perception is that the oil price is a good proxy for inflation expectations," Bowers added.

The financial sector has benefited most with investors' enthusiasm for financial stocks, the survey, in which a total of 210 fund managers participated who manage a total of $643bn (£304.08bn), found.

However, simultaneously it showed that the lower prices for oil and other commodities spelt bad news for global emerging markets, as investors are starting to turn away from the asset class.

"The bull market in global emerging market equities has paused for breath, and underperformance relative to developed markets is likely until global lead indicators trough in the first half of 2007," said Michael Hartnett, chief global emerging market equities strategist at Merrill Lynch in New York.

Also the survey showed that global investors are underweight energy stocks for the first time in nearly five years.

Paradoxically to a collapse in growth expectations due to the falling commodity prices, it appeared that continental European equities have become investors' favourites.

For the first time investors perceive that earnings' quality in the euro zone is higher than in the UK: a net of 36% of asset allocators are overweight euro zone stocks.



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