The countries accepted for membership in 2004, on condition of meeting various requirements, are the three Baltic states, the Czech Republic, Hungary, Poland, Slovakia, Slovenia as well as Cyprus and Malta.
The same sentiment applied to the likely influence on their bond markets. Nearly 80% said these countries’ bond markets would be positively or very positively affected. These confidence level
s are likely a result of the increased financial convergence that is expected to emerge between the prospective and existing members.
Niklas Tell, the editor-in-chief of Morningstar in Europe, said: “Fund managers are optimistic about the prospects for the markets of these ten countries.
“The optimism about emerging Europe is in stark contrast to the generally gloomy mood, which has pervaded the world’s stockmarkets.”
Yet managers generally expected enlargement to have no impact on the stockmarkets of the 15 existing members states, with 81% saying the effect would be neutral. About 13% said it would be positive with about half as many saying it would be a negative move.
Stockmarket performance
Despite the recent stockmarket falls fund managers were positive about the performance of shares over the next year. Some 97% expected the stockmarket to be higher in a year’s time.
Just over half of managers expected a rise of 5-10% while a third expected returns of 10% or more. The managers’ stance on the performances of shares was fairly consistent with that of last month, though movements at the extremes were noted. Although the overall numbers remain small more managers expected a negative return while fewer expected to see returns of 15% or more.
Some 79% of managers said the euro would be the top performing currency over the next 12 months. This represents a return to levels last seen over the summer.
This question was first asked in January 2001 where some 71% of managers chose the euro to be the top performer over the next year. Since then it has strengthened against the dollar and the pound.
There was a big movement against the dollar in January. Nearly half of managers - up from 18% in December - said it would return the worst performance over 2003. The view on the yen, which has been the least favourite for managers in recent months, improved. Some 34% of managers, compared with 63% in December, said it would be the worst performer.
Enhanced sectors
The stockmarket sector coverage was expanded in January. The survey now offers managers the choice of 12 sectors for ranking in terms of performance over the next year, up from 5. This move aims to provide investors with a more in-depth opinion of the best and worst sectors according to the managers surveyed.
Telecommunications topped the list with 32%. Industrial materials – a sector that includes aerospace and defence firms as well as chemical and machinery manufacturers – followed with 19%. Financial services and healthcare tied for third place with 13%.
Managers said energy, hardware and media would be the worst performers. Last month when the sector choices were broader technology, media and telecoms was expected to perform best and property worst.
Meanwhile, an increasing number of managers said large firms will outperform small ones over the next year. Nearly half of managers favoured big companies while only 12% said small firms would outperform.
In relation to bonds managers saw more opportunity in the corporate sector. A new question in the survey this month revealed that 91% of managers said corporate debt would outperform government debt in the next 12 months.
In terms of regional performance over the next 12 months Asia excluding Japan grabbed the top spot from America. Some 39% ranked the Asian region first while 30% said America. Europe excluding the UK came in third with 18%.
Managers were more divided about where would offer the worst performance. In December managers were split between Latin America (38%) and Japan (36%). Yet in January 43% said Japan would be the worst place to invest. The sentiment was spread out after Japan with 17% saying America, 15% saying Europe excluding the UK, 14% for Latin America and 11% for the UK.
Morningstar’s European offices conducted the survey from January 14th–24th. The participants, 68 fund management groups from 12 countries, on average managed €53 billion (£35 billion) and offered 77 retail funds each.
