By Claire Milhench
LONDON (Reuters) - Investors raised their equity holdings in April from March's five-year lows, taking the view that the global stock market rally will continue as long as central banks maintain their loose monetary policies, a Reuters poll showed on Friday.
However, an overwhelming majority of survey respondents who expressed a view - 94 percent - do not expect central banks to deploy 'helicopter money' this year, while saying that they seem to be running out of options to stimulate growth.
Equity allocations rebounded to 46.6 percent, the highest level since January, with the MSCI World equity index (MIWD00000PUS) up almost 17 percent over the last three months.
The moves higher in global stock markets have been accompanied by a recovery in oil prices to over $48 a barrel, receding worries about the Chinese economy, and the U.S. Federal Reserve indicating it is in no hurry to tighten policy.
"We are still seeing the 'Yellen Put' as a support for global equity markets," said Peter Lowman, chief investment officer at UK wealth manager Investment Quorum. He pointed out that Fed chair Janet Yellen had said on numerous occasions she is more concerned about outside forces than the state of the U.S. economic recovery.
The survey of 58 fund managers and chief investment officers in the United States, Europe, Britain and Japan was conducted between April 15 and 28.
As well as raising their equity holdings, investors trimmed their bond holdings to 37.6 percent in April, the lowest since January. Allocations to cash and alternatives were steady.
The Fed's dovish stance, in conjunction with continued stimulus from the European Central Bank and the Bank of Japan's adoption of negative interest rates in January, has helped drive equity markets higher since mid-February.
Emerging market stocks (MSCIEF) have been a major beneficiary of investors' greater willingness to take on risk, surging 22 percent from their February lows.
Some 47 percent of respondents who expressed a view thought this emerging markets rally could continue, citing positive factors such as the weaker dollar, the rebound in commodity prices and an improvement in Chinese economic data.
PULL BACK
However, 32 percent thought it could not be sustained, and another 21 percent said it was dependent on a number of factors outside emerging markets' control, and a pull-back could occur.
Raphael Gallardo, a strategist at Natixis Asset Management, argued that the rebound in commodity prices had "clay feet". "It stems from the market belief that the worst is over for Chinese growth, which is, in our view, extremely complacent," he said.
Anders Lund Larsen, a portfolio manager at SEB Investment Management, questioned whether the weaker dollar would persist. "The recent rally is also a reflection of the extremely bearish sentiment and positioning on emerging markets," he said.
"What we have witnessed is an unwind of some of those big underweights but we don't see the macro backdrop as strong enough to engineer a sustained rotation into EM assets."
Within their global equity portfolios, asset managers maintained their exposure to emerging equities at 13 percent, cut their allocations to U.S. stocks by one percentage point to 37.2 percent, and raised their Japanese equity holdings to 20.8 percent, the highest since November 2014.
The Japanese stock market (N225) rallied hard in the first half of April, climbing 9 percent, but has tumbled 5 percent over the past week after the BOJ declined to deploy more stimulus at its April meeting.
HELICOPTER MONEY
Governor Haruhiko Kuroda tried to counter the view that the BOJ was running out of options, while dismissing the idea of "helicopter money" - where people are given cash handouts in the hope they will spend it.
The notion that central banks might have to adopt increasingly unorthodox measures has been mooted in recent weeks, but on the whole, survey respondents did not expect them to resort to using "helicopter money" this year.
"What is striking at the moment is the lack of a broader consensus between policy makers about what monetary policy can achieve and what it should do in the current situation," said Jan Bopp, asset allocation strategist at Bank J Safra Sarasin.
Several managers said that deploying helicopter money had a poor track record and would have little or no credibility with financial markets who would just see it as a sign that central banks had run out of ways to stimulate growth.
"Helicopter money is quite controversial and may have some legal barriers," said Joost van Leenders, chief economist at BNP Paribas (PA:BNPP) Investment Partners.
"The U.S. economy does not look in need of helicopter money and the hawks at the ECB are far from convinced that it will work." But he added that Japan might not be far from this experiment.