‘UK investors cut equity allocations to lowest in three years’

A new survey indicates British investors cut equity allocations in September to their lowest in three years amid concerns over fragile growth worldwide.

The monthly poll conducted by Reuters of eight UK-based investment managers showed an average exposure to shares fell more than six percentage points from August to 47.6 percent. Investors were found buying more bonds and property in response to turbulent stock markets and the potential fallout from China’s slowdown.

“At this moment, insecurity is prevailing in Western economies and governments as well as economists are all trading their blame on China. But China is really a canary in the wood and in this case a very big canary indeed because China is an exporting economy and the problem it [China] is having is that its export is not in trouble and as a result of that commodity prices are down and behind that, is the genuine lowering demand which is the big problem right away surrounding the global economy. That lowering of the demand is due to the buildup of debt, the system works on burdening up debt on the mass of population in order that the wealth can be sucked up by the top one percent”, Rodney Shakespeare, a London-based Professor in Economics told Press TV.

The survey coincided with a plunge in global markets after the US Federal Reserve delayed its first interest rate hike in nine years citing the fragile world growth. The uncertainty and mixed messages from Fed officials, however, helped push global equity markets to low.

As the Bank of England is unlikely to raise rates until next year, some of those surveyed said they still expect the Fed to raise rates this year. "Any errors of judgment in US central bank policy at this delicate stage could be devastating for global economic growth," said Peter Lowman, the chief investment officer at Investment Quorum.

Similar concerns were prevailing among fund managers and chief investment officers interviewed by Reuters elsewhere such as the United States, Europe, Japan and China.Major fears seemed revolving around China and other emerging markets, which have recently suffered an investor exodus amid tumbling commodity prices and the slowest growth. 

“Investors are alert to the fact that if they start putting in more capital spending because that is what equity is all about, their hope will be dashed because the demand is not there. And if the government [in the UK] says there's demand then its simply lying”, Shakespeare said.       

The collapse in commodity prices is increasingly raising fears over debt repayments, particularly for African nations. Investors continued to steer clear of emerging markets even though equities have fallen for five straight months for year-to-date losses of almost 20 percent. Emerging debt market returns are also deep in the red.

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