Investors optimistic on global growth but China real estate top worry: BofA survey

LONDON: China’s real estate sector is the most likely source of a global systemic credit event, according to Bank of America’s September fund manager survey, which also found investor sentiment on the global economy outside China was improving.

A third of respondents in the survey cited Chinese real estate as the biggest credit event risk, overtaking U.S. and EU commercial real estate at 32%.

The survey of 222 fund managers with $616 billion assets under management was carried out between Sept. 1 and 7.

The world’s second-largest economy has been struggling for much of this year as demand at home and abroad has weakened and a deepening property crisis has put more downward pressure on growth, pushing Beijing to roll out a series of support measures.

The latest turmoil in China’s property sector has focused on Country Garden, the country’s largest private developer. Reuters reported on Tuesday, citing sources familiar with the matter, that the company had won approval from creditors to extend repayments on six onshore bonds.

However, away from China, investor sentiment towards global growth is turning more positive, the survey found, with roughly three-quarters of respondents expecting a soft landing for the global economy - terminology that typically refers to a gradual economic slowdown - or no slowdown at all.

September’s survey saw a record jump in respondents’ allocation with a shift into U.S. equities and out of emerging market equities. Overall investors are overweight U.S. equities for the first time since August 2022.

China growth expectations slumped, with the overall percentage of respondents expecting a stronger economy in the next 12 months falling to 0% from 78% in the February poll, and lower than a year ago when the world’s second largest economy was still in the midst of strict anti-COVID lockdowns.

In contrast investors are continuing to be bullish about Japan, and the survey found investors overall are at their most overweight Japanese equities since December 2018.