The managers of Allianz OCC Growth Fund look for big stocks ready to make big moves. “We do it through fundamental analysis,” said co-manager Robert Urquhart. “Our analysts try to find stocks with anomalies. We look for stocks that are underappreciated by the market.” The fund likes stocks with attractive valuations. But the managers are not bargain hunters. “We’re looking for the best return opportunities at a given price,” said co-manager Martin...

Concerns about rising prices have also leapt with 60% of fund managers expect core inflation to rise in the next 12 months - compared to 7% in April. This prompts predictions of higher bond yields with a staggering 80% of investors expecting long-term rates to increase in the next 12 months.

David Bowers, independent consultant at Merrill Lynch, said: ‘Evidence is pointing to a possible sell off in bonds as inflation worries mount,’ he says: ‘A sharp rise in bond yields could help convert this financial crisis into an economic crisis.’

Eurozone investors remain enthusiastic on the commodity trade. Oil and gas, seen as inflation proof, extended its position as Europe’s favourite sector with 41% of investors - an increase of 20% from April.

Karen Olney, chief European strategist at Merrill Lynch, said the need for commodities in developing markets, not labour, are scarce resources in a slow down - bringing with it pricing power. She says: ‘Earnings momentum drives-out performance - not value.’

The other three biggest movers in popularity were chemicals, construction and the industrials with losers being anything linked to the credit binge and/or reliant on the overstretched Anglo-Saxon consumer.

In the UK, cash remained king with managers continuing to hold record amounts on the sidelines. Only 7% of managers now see the UK market as undervalued, compared with 53% two months ago. Following the trend, UK managers no longer saw outlook for growth as the main problem with only 60% now believing the economy will weaken in the year ahead - down 12% from last year. Rather, concerns lie with the impact of higher oil prices and weaker sterling on inflation.

Continuing worries about the UK banks sector has prompted a switch to oil stocks. Last month a quarter of UK investors said banks were undervalued - that number now has fallen to zero. Olney said: ‘Banks are being penalised for earnings decay. While still unloved, this month they are no longer seen as cheap.’

Banks in crisis

The Merrill Lynch survey included 191 fund managers around the world who between them managed a total of about 315bn in assets.

Other stories:
Should you take up B&B rights issue?
Beware dangers of these ’safe havens’ for your cash
Is it time to buy bank shares?
Warren Buffett tips South Korea
Invesco axes below-par investment funds
Win the investment marathon
Market report: Wednesday latest
Newspaper and magazine share tips
Fund Focus: Jupiter Merlin Income
Share tips: Sunday round-up

The Bank of Nova Scotia would like to see less “hollowing out” of Corporate Canada. We think. But Rick Waugh, CEO of Scotiabank, argues in a recent op-ed in a competing paper that “more important than trying to prevent the loss of Canadian control, we need to focus on ensuring Canada has the right framework in place to support the growth of Canadian companies.” And what is this “right framework”? No limits on foreign ownership for most industries. An...