Merrill Lynch Fund Manager Survey Finds Growing Optimism in Global Economic Outlook

NEW YORK and LONDON - Fear over Banks Holds Back Equity Recovery

Investors are at their most optimistic about the global economy since
December 2005, according to the Merrill Lynch Survey of Fund Managers for
March. However, the prolonged banking crisis seems to be stopping them from
putting cash into equities.

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For the first time in more than three years, investors do not predict
lower global economic growth over the next 12 months. Renewed optimism about
China’s economy lies at the heart of this revival. Just two months ago, a net
70 percent of respondents thought China’s economy would worsen in the year
ahead. That figure fell to a net 1 percent this month.

At the same time, risk appetite has dropped with investor pessimism
towards banks at a record high. A net 48 percent of asset allocators said
they are underweight banks this month, up from a net 39 percent in February.
A total of 22 percent said they are aggressively underweight banks, versus 17
percent in February. Respondents are noticeably bearish about Japanese and
eurozone equities.

“March’s survey shows signs that investors want to believe in an economic
recovery. However, caution on banks is firmly capping risk appetite,” said
Gary Baker, Banc of America Securities-Merrill Lynch co-head of international
investment strategy. “How investors resolve this anomaly between growth
optimism and risk reluctance will determine the fate of equity markets this
spring,” said Michael Hartnett, Banc of America Securities-Merrill Lynch
co-head of international investment strategy.

Out of equities, into safe havens

Risk appetite in equities took a marked downward turn in March despite
the improved economic outlook. Respondents say they have reduced their equity
exposure in the past month while increasing cash holdings and fixed-income
investments.

A net 41 percent of respondents are underweight equities, up from a net
34 percent in February. World equities fell by 15.5 percent during the days
the survey took place. Investors appeared to have flooded into bonds with a
net 26 percent of the panel overweight the assets class, up sharply from a
net 7 percent the previous month. Average cash balances rose to 5.2 percent
from 4.9 percent in February.

Signs of an early recovery phase have appeared, however. A net 42 percent
of the panel believe equities are undervalued, up from a net 24 percent in
February. Changes in sector allocation indicate a movement out of the most
defensive stocks, such as in Pharmaceuticals - where a net 30 percent are now
overweight the sector, down from a net 37 percent in February. At the same
time the panel has increased exposure to Technology, a much more cyclical
industry. A net 28 percent of respondents are overweight the sector, up from
a net 15 percent in February.

BRIC is back but eurozone and Japan shunned

While the U.S. continues to fuel economic optimism, investors have become
more bullish about emerging markets, especially China.

Respondents have taken a net overweight position in emerging markets
equities for the first time since August 2008. A net 4 percent are overweight
the sector compared with net 4 percent being underweight in February. At the
same time, commodities have made further gains with the number of investors
underweight the asset class falling to a net 6 percent, down from a net 25
percent in January.

“Optimism on growth has been expressed with higher weightings in emerging
markets equities and commodities,” said Michael Hartnett. In contrast,
investors have further reduced equity investment in the eurozone and Japan.
“Investors might look to review their extreme underweight positions in
eurozone and Japanese equities if economic data follow growth expectations
higher,” Hartnett said.

A net 40 percent of respondents are now underweight eurozone equities and
a net 39 percents are underweight Japanese equities.

Survey of Fund Managers

A total of 213 fund managers, managing a total of US$533 billion,
participated in the global survey from March 6 to March 12. A total of 183
managers, managing US$365 billion, participated in the regional surveys. The
survey was conducted by Banc of America Securities - Merrill Lynch Research
with the help of market research company TNS. Through its international
network in more than 50 countries, TNS provides market information services
in over 80 countries to national and multi-national organizations. It is
ranked as the fourth-largest market information group in the world.

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Merrill Lynch

Merrill Lynch is one of the world’s leading wealth management, capital
markets and advisory companies, with offices in 40 countries and territories
and total client assets of approximately US$1.2 trillion at December 26,
2008. As an investment bank, it is a leading global trader and underwriter of
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as a strategic advisor to corporations, governments, institutions and
individuals worldwide. Merrill Lynch has approximately 50 percent ownership
in BlackRock Inc., one of the world’s largest publicly traded investment
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Source: Bank of America Merrill Lynch

Susan McCabe Walley, Banc of America Securities-Merrill Lynch, +1-212-449-0389, susan_mccabe at ml.com, Tomos Rhys Edwards, Banc of America Securities-Merrill Lynch, +44-20-7995-2763, tomos_edwards at ml.com; Logo: https://www.newscom.com/cgi-bin/prnh/20050720/CLW086LOGO-b