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Fund managers hunt for bargains after Red October

Fund managers hunt for bargains after Red October

Fund managers have dipped into their cash holdings to buy into stocks after markets tumbled during 'Red October', snapping up shares in US and emerging markets companies.

Bank of America Merrill Lynch's global fund manager survey showed stock pickers had cut their cash levels from 5.1% in October to 4.7% this month.

They bought into US stocks, with a net 14% of global managers now  'overweight', or holding more than the market weighting, in the world's largest economy. That saw the US regain its spot as the most favoured equity region for fund managers.

Emerging markets were in demand too. A net 10% of managers were underweight the region in September, but by last month managers had moved to an overweight position. They are now backing the region even more strongly, with a net 13% overweight.

Fund managers meanwhile rushed out of technology stocks as the sector took a beating last month. The top-performing sector has long been the most popular among managers, but October's stock market slump hit technology stocks harder than most.

A net 18% of global fund managers now say they are overweight the sector, down from a net 25% in October.

Healthcare has replaced technology at the top of the tree as the sector of the stock market with the highest conviction backing, with a net 28% of global fund managers saying they are overweight.

The sector had been 2018's best performer in the US stock market, before it took a hit in October's sell-off, after US president Donald Trump launched another attack on drug pricing.

Trump said last month he wanted to lower the prices paid by the US government's Medicare programme for prescription drugs, bringing them more closely in line with the prices paid by other countries.

Fund managers remain overweight global energy stocks despite oil's bear market, although this month that was down to a net 9% of managers, falling from 16% last month.

Persistently weak sentiment towards the UK meanwhile showed no signs of lifting. A net 27% of fund managers are underweight UK stocks, from 19% last month, as the Brexit deadline approaches.

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