| LONDON, June 13
LONDON, June 13 A record number of investors say
equities are overvalued and three-quarters say internet stocks
are expensive or in a bubble, a Bank of America Merrill Lynch
fund manager poll showed on Tuesday, with tech-heavy Nasdaq
deemed the most crowded trade.
The survey, which polled 210 asset managers with $596
billion under management, was carried out June 2-8, just ahead
of a two-day rout in U.S. tech stocks led by Apple,
Facebook, Microsoft and Alphabet.
The Nasdaq Composite ended Monday down 0.5 percent,
extending Friday's 1.8 percent fall. The sell-off was triggered
by reports Apple was using slower modems in upcoming iPhones
compared with those in rivals' phones, and a bearish Goldman
Sachs note on the mega-cap tech sector.
In the BAML poll, a net 44 percent of investors said
equities were overvalued, up from a net 37 percent last month,
and beating the previous record high set in 1999's dotcom
Being long Nasdaq was seen as the most crowded trade for the
second month in a row, cited by 38 percent, up from 26 percent
Some 57 percent said internet stocks were "expensive", with
18 percent describing them as "bubble-like". A net 84 percent of
respondents said the U.S. was the most overvalued region for
equities, a new all-time high.
Despite these concerns, investors raised their global tech
sector allocation to a net 37 percent overweight from last
month's 33 percent overweight. Their overall U.S. equity
allocation rose slightly to a net 15 percent underweight from a
net 17 percent underweight last month.
The S&P 500's technology sector has ballooned
nearly 14 percent since President Donald Trump's inauguration in
January to its most expensive since early 2008 in terms of price
to earnings expectations.
"Market vulnerability to profit weakness is very high, with
investors' perception of excess valuation coinciding with high
global profit expectations," said Michael Hartnett, chief
investment strategist at BAML.
A net 47 percent of investors said global monetary policy
was too stimulative, the highest since April 2011.
But in contrast to the 1999 bubble, BAML detected less
irrational exuberance, as cash levels rose to 5 percent from
last month's 4.9 percent, remaining above the 10-year average of
European and emerging market equities were viewed as
undervalued by a net 18 percent and a net 48 percent
respectively. However, the allocation to eurozone equities is
near two-year highs at a net 58 percent overweight.
"It leaves sentiment reported on Europe continuing to look
very bullish, which may provide a headwind to renewed
outperformance for European stocks," said Ronan Carr, European
equity strategist. European stocks are up around 7
Chinese credit tightening ranked as the top tail risk for
the second straight month, chosen by 31 percent of poll
participants. Eighteen percent selected a crash in global bond
(Editing by Ed Osmond)