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To: lorne who wrote (46007)	12/15/1999 10:48:00 AM
From: lorne	Respond to of 116768

OT. Fund Managers Cut Cash Reserves as Stocks Rally: Mutual Funds Wed, 15 Dec 1999, 10:15am EST By Tim Quinson London, Dec. 14 (Bloomberg) -- Money managers around the world are holding less cash than they have in at least two years, a bearish sign for global stock markets, many of which hover at record highs, according to an industry report. The average global fund manager has 4.7 percent of assets in cash, down from 11.2 percent as recently as September 1998, according to a survey by Merrill Lynch & Co. of 243 investment firms that oversee a combined $8.3 trillion. ''With cash levels so low, fund managers don't have as much firepower and that's not a good indicator for the stock markets,'' said Trevor Greetham, an investment strategist at Merrill who compiled the monthly survey. Fund managers in the U.S. and continental Europe have been particularly aggressive about using cash to buy stocks, helping explain recent market rallies in those regions. Over the past two months, the U.S.'s Standard & Poor's 500 Index has climbed 13.7 percent and France's CAC 40 Index has risen 22.7 percent. Almost simultaneously, money managers in continental Europe cut their cash holdings to 3 percent from 6 percent, and U.S. managers of international funds reduced their cash allocation to 1 percent of their portfolios, according to Merrill's survey. ''What's happening is inconsistent with the expectation of rising commodity prices and interest rates next year,'' Greetham said. Merrill, the largest U.S. brokerage, is maintaining its more conservative view of the global markets. Investors should keep 10 percent of their assets in cash, Greetham said. ''Central banks are likely to raise rates until the next global manufacturing downturn begins and this is bad news for stocks,'' he said. Selling Bonds Money managers are selling bonds because they expect the U.S. Federal Reserve and the European Central Bank to boost interest rates. They aren't reducing their exposure to stocks. In the U.S., investors are trimming their holdings of U.S. Treasuries, and at the same time, buying technology stocks and increasing their exposure to European and Latin American stocks, according to Merrill's survey. European fund managers are buying shares of telecommunications and electronics companies and reducing their exposure to domestic and foreign bonds. U.K. investors are selling bonds for the first time since September amid global concern about rising commodities prices, Merrill reported. In Japan, investors are selling overseas bonds at the fastest rate since 1994 while maintaining their bullish view of the global stock markets. Japanese fund managers expect the domestic economy to strengthen in 2000 and Merrill analysts do too, Greetham said. ''Japanese growth has disappointed many times in the past but this time the yen is strong and ample liquidity should underpin the economic recovery,'' he said. According to Merrill's survey, investor support for the U.S. dollar is gaining at the expense of the euro and the yen. The survey of fund management companies was carried out between Dec. 3 and Dec. 8 by Gallup and includes comments from chief investment officers, economists and portfolio managers. quote.bloomberg.com