IPE - Four-fifths of respondents to IPE's Investment Manager Expectations Indicator for March have said they are more optimistic now about US equities than they have been for more than a year.

The Indicator - which surveyed more than 90 major asset managers in 20 countries across Europe and the Americas - found that 81% of respondents believe US markets will improve, while 16% believe they will largely hold steady.

Only 3% predict they will fall.

Iheshan Faasee, client portfolio manager of client strategies for the EMEA region at Russell Investments, attributed the return of confidence to the fact many concerns over a sustainable recovery had been put to rest.

"While unemployment will remain high in the US, corporate earnings have been good and are expected to show moderate growth," he said.

"One example is [that] the US financial services sector is seen as attractive relative to its European counterparts, given the exposure to the European sovereign debt crisis."

Conversely, respondents to IPE's Indicator took a dim view of Asia ex Japan equities, which, of all assets classes, showed the largest drop in expectations. 

Despite the fact China has increased interest rates for the third time in four months, expectations for the region have fallen for the second month running.

IPE's Indicator found that 11% of respondents believe Asia ex Japan equities will fall in value, up from 8% the month previous. Those predicting an increase in value fell from 74% to 66% over the same period.

Examining Asia's recent downturn in popularity, where only 66% of respondents expected market growth, Faasee said asset managers still believed in the long-term prospects of emerging markets, but that instability in China gave reason for doubt.

"The recent pullback in China could be attributed to a number of factors including inflation, over-valuation and where the Chinese are becoming increasingly an importer relative to their levels of export," he said.

He added that market pullbacks and rallies should be expected, consistent with behavior for a secular growth story.

Respondents were increasingly bullish on euro-zone equities, with 73% predicting increases, compared with 69% in February.

However, investors remained uncertain about European sovereign debt. While 10% now predict a price increase for the euro-zone - a 6 percentage point increase since January - an overwhelming majority of 60% still anticipate a decline in euro currency debt.

A detailed breakdown of March's Investment Manager Expectations Indicator will be available in next month's issue of IPE.

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