Fund managers lose their nerve

CONFIDENCE among fund managers worldwide plummeted during the past month as stock market turmoil took its toll on their expectations for growth and profits.

The latest survey of institutional investors by Merrill Lynch today showed earnings per share growth is now expected to languish at only 7% this year compared with the 10% predicted a month ago.

The survey's headline stock market conditions indicator - a melting pot of corporate profit expectations, interest rate prospects, equity valuation forecasts and investor sentiment - fell to 14.9 from 15.6 last month.

Profit expectations took the biggest turn for the worst while concerns about higher interest rates evaporated.

'They have lost confidence in the recovery and now see cost-cutting as the prime driver for earnings growth,' said Merrill Lynch's chief global investment strategist David Bowers.

The survey also showed a record proportion of respondents felt that global equity markets are undervalued. Despite this, the survey showed fund managers are becoming more cautious, saying they are more reluctant to 'buy on the dips'.