Indeed, Naira devaluation is probably the most potent weapon against the prosperity of Nigerians. Nigeria’s migration from a potential industrial power house with bustling social affluence, to a subdued and stumbling economy clearly began with the adoption of IMF’s Structural Adjustment Programme during Babangida’s regime: the chorus from International Agencies, at that time, was also that falling oil prices with an unserviced debt burden and the consequent restriction of trade credit to Nigeria, were the products of an allegedly overvalued Naira exchange rate.
A survey released yesterday by BofA Merrill Lynch Fund Manager, Bank of America has revealed that investors across the globe are concerned over the imminent end of quantitative easing (QE) in the U.S. saying that it has left investors much less confident in the outlook for the global economy and corporate profit.
It said in the October survey that after sharp fall of more than 20 percentage points from September, only a net 32 percent of respondents expect the global economy to strengthen over the next 12 months. This is the lowest reading in two years.
Inflation and earnings expectations have slumped: recent consensus over the world experiencing both below-trend inflation and below-trend growth is even stronger this month at 77 percent.
According to the survey report “Monetary policy underlies this shift in sentiment.
Only a net 18 percent of fund managers now view policy as too stimulative, down 14 percentage points to the lowest level since August 2012 – just before the last QE initiative in the U.S. Perceptions of monetary risk have also risen, along with Emerging Market risk.
“Investors’ response has been to reduce riskier exposures. Cash balances have risen to 4.9 percent, while investment horizons have shortened and equity overweights have fallen rapidly (down a net 13 percentage points month-on-month).
Underweights in commodities have also risen, while sectors sensitive to the asset class like energy and materials have seen large moves to net underweight positions.
“Respondents have lost their appetite for Emerging Markets and European equities. Both current positioning and intentions for the next 12 months have turned negative or neutral.
Instead, they have regained faith in the U.S. market and increased their preference for Japan.
“Cash balances are high, but investors are retreating to benchmark positions rather than staging an exodus from markets,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
“With the European Central Bank ‘hope trade’ gone, performance in European equities is reverting to fundamentals.
As our view remains downbeat, we continue to favor defensive dividend yield stocks and expect any rallies in cyclical stocks to be short lived,” added Manish Kabra, European equity and quantitative strategist.
The report also said “Following the European Central Bank’s press conference at the start of the month, respondents are uncertain over policy in Europe.
Twenty-six percent of the global panel now does not expect the ECB to initiate a program of QE, up from last month’s 19 percent.
Expectations over Europe’s growth have declined markedly. Only a net 16 percent of regional fund managers now expect the continent’s economy to strengthen over the next year. This compares to a net 45 percent last month.
The outlook for corporate profitability is heavily affected by this. After a month-on-month decline of nearly 30 percentage points, a net 52 percent now does not expect double-digit earnings growth in the region, while an even high proportion of fund managers judge earnings-per-share estimates for European companies.
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