Merrill Upgrades Emerging Market Stocks To Overweight Versus Neutral
NEW YORK -(Dow Jones)- Merrill Lynch has raised emerging market equities to overweight from neutral in the first reshuffling of its recommended global equity allocation since last April. In a report Wednesday, the investment house said the region is now its favorite, replacing the U.S., which was demoted to third place in Merrill's regional rankings.
"With the global recovery gathering momentum, we believe that now is the time to take a positive stance on the more cyclical equity markets around the world," Merrill said in explaining its recommended move into emerging markets.
"The secular story is that emerging markets were deprived of capital in the late nineties by the relative attractiveness of U.S. tech stocks, and were de- rated relative to the world," the investment bank said.
"The situation may be changing. Macro management is improving, the perceived returns from U.S. tech stocks appear to be slipping, and relative valuations are starting to look attractive," it said.
Merrill lowered its recommendation on U.S. stocks to neutral from overweight, and also downgraded U.K. stocks for their "defensive qualities in what looks like an increasingly cyclical environment."
In line with that expected upswing, Merrill upgraded euro-zone equities. It also recommended picking up Japanese stocks, as the country is "likely to benefit from improved economic prospects" in the global upturn.