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Stock Shakeout Dents High-Tech Love
By James Saft   Reuters
LONDON — Fund managers around the world are cooling toward technology, media and telecom stocks, which have suffered a humbling global stock market shakeout, according to the monthly Merrill Lynch Gallup survey released on Tuesday.

Fund managers who are bullish on TMT stocks fell by as much as ten percent, while bears on the three sectors rose sharply.

Instead, money managers are turning to "defensive" stocks, such as pharmaceuticals and consumer products, betting that they would fare better in periods of stock market volatility and declining optimism.

High-flying technology stocks suffered a rout in the month since the last poll was taken, with the bellwether U.S. Nasdaq index falling more than 17 percent.

A declining 57 percent of the 253 funds in the survey are expecting stronger global economic growth in a year, down from 67 percent in March.

Fund managers also expect economic growth to slow in every major economy in the world save Japan in 2001, with the U.S. slated for a decline from 4.2 percent to 3.4 percent.

"Economic optimism is falling in almost every region," said Trevor Greetham, Merrill Lynch global strategist.

"By shifting into defensive sectors markets may be pricing in a peak in global growth." The euro remains the currency of choice on a year's view, favored by 54 percent of respondents, but the yen saw a sharp uptick in support, from 12 percent to 22 percent.

Fund managers also see declining corporate profits growth in every major market except Japan in 2001, with Europe seen falling to 13.7 percent from 15.3 percent.

Funds remain sellers of U.S. shares, with sellers outnumbering buyers by about ten percent.

But net support for Japanese equities climbed above twenty percent, helped by strong demand among local Japanese managers, according to the survey.

On average equity funds were sellers of U.S. stocks but buyers of every other major market.

The move away from TMT was especially marked in continental Europe, where funds are now net bears of media shares, which had been the fourth most popular sector in March. Support for telecom and technology shares also crumbled.

Whereas a net 13.2 percent of European managers had been bulls of software and computer services shares in March, April found only support from a net 3.4 percent.

"The European love affair with TMT has soured," said Merrill's Greetham.

"Managers are much less bullish on the tech and telecom sectors and have turned bears of media for the first time since July 1998.

"In preference, managers have turned bullish on interest rate sensitive financials and defensive pharmaceuticals."

Japan-based fund managers are strongly positive on Tokyo shares and the yen, with buying support at near record levels.

Bulls of Japanese stocks outnumber bears by 75 percent and 78 percent of managers are overweight domestic equities, the survey showed.

Fully 62 percent named the yen as their currency of choice on a year's view, a record and a big increase from 39 percent a month ago.

The survey, conducted between March 31 and April 5, included responses from 253 institutions globally controlling assets of $9.345 trillion.

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