* Long FAANG & BAT top "most crowded" trade
* But tech stocks positioning cut to lowest since Feb 2013
* Allocation to equities falls to 18-month low
* Average cash balances rise to 5 percent
* Earnings expectations fall
(Adds details, quotes)
By Helen Reid
LONDON, April 17 (Reuters) - Alarm bells are ringing over
valuations of the world's leading technology stocks with worries
over regulation causing many investors to cut exposure to the
sector, Bank of America Merrill Lynch (BAML)'s April fund
manager survey found.
"Long FAANG + BAT" remains the top pick for "most crowded
trade" for the third month running, BAML strategists said,
referring to U.S. tech companies Facebook, Apple
, Amazon, Netflix and Google
, and China's Baidu, Alibaba and
Since December last year, the "most-crowded" trades featured
in the survey have reversed in a short space of time following
the poll's publication. These include long-Bitcoin (December)
and short-volatility (January).
While survey participants still saw the tech stocks as
popular, allocations to tech actually fell to their lowest since
February 2013 on fears companies such as Facebook could face
tighter regulation and higher barriers to trade.
Increasing anxiety about stock markets' resilience led
investors to reduce their positions on stocks generally, with
bank stocks and Japan particularly targeted.
Allocation to equities fell to an 18-month low, while some
40 percent of investors surveyed expected the stock market to
peak in the second half of this year.
Only 18 percent said the market had already peaked, however,
while 39 percent said the peak wouldn't come until next year.
"Bulls silenced, not routed," wrote BAML strategists.
COMMODITIES, UK STOCKS IN DEMAND
Investors meanwhile reduced their bearish bets on bonds.
On average they said U.S. 10-year Treasury bond yields would
have to reach 3.50 percent before they would rotate from
equities back into bonds. The benchmark bonds were last yielding
In equities, fund managers ramped up their allocation to
commodities to an eight-year high, and UK stocks to the highest
since the Brexit vote in June 2016.
Shorting the U.S. dollar was seen as the second-most crowded
trade, followed by buying corporate bonds. Hedge funds have been
ramping up their short bets on the dollar to a total value of
After a ratcheting up of protectionist rhetoric between the
U.S. and China, 38 percent of investors said they saw the threat
of a trade war as the biggest risk, well ahead of concerns about
central banks, market structure or inflation.
Average cash balances increased to 5 percent, ahead of the
10-year average of 4.5 percent. Strategists said a cash balance
ahead of that average was a "buy" signal for equities.
Fund managers were pessimistic on the health of global
Expectations for global growth and profits were at 18-month
lows, and only 8 percent of respondents thought earnings per
share would rise in the next 12 months, down from 35 percent in
Doubts about indebtedness also increased: a record share of
surveyed investors said companies are excessively levered.
In contrarian trades, government bonds, the U.S. dollar, and
liquid defensives stocks such as pharmaceuticals or consumer
staples were seen as the most unusual buys, while investors also
saw shorting cyclical stocks and emerging market equities as
going against the pack.
(Reporting by Helen Reid
Editing by Ritvik Carvalho/Keith Weir)
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