By Jeremy Gaunt, European Investment Correspondent
LONDON (Reuters) - Holdings of equities by leading INVESTOR (INVEB.ES) hit a new low in October as financial markets quaked before the deteriorating global economy and credit crisis, with only U.S. fund managers showing signs of improving sentiment.
Reuters polls of 44 fund management companies in the United States, continental Europe, Japan and Britain showed an average portfolio holding 54.7 percent of its money in equities, the lowest level in the 4-1/2 years compilations have been made.
It was down from 56.0 percent in September and more than five percentage points below the 60 percent long-term average for stock holdings.
Bond holdings slipped to 32.3 percent from 32.7 percent in September. Cash rose to 6.3 percent, a high for the 4-1/2 years, from 5.8 percent.
"The outlook for the global economy is gloomy, as evidenced by the continuing deterioration in the U.S. housing market, the slowing European economy and weakness emerging in economies in Asia," said Kiyoshi Ishigane, a strategist at Mitsubishi UFJ Asset Management.
"In this situation, stock markets will continue to be volatile, while bonds will remain firm."
The fall in equity holdings during the month is little, if any, surprise given that the benchmark MSCI all country world stock index fell around 29 percent between polls.
But there was one sign in the polls that some investors believe stock markets may be at or near the bottom.
As a group, U.S. investors raised their exposure to stocks, although they remained well below the long-term average.
"What we have been seeing is panic-selling," said Brian Gendreau, an investment strategist in New York for ING Investment Management Americas.
"This can't go on forever and I think investors who are selling now are doing so at the bottom."
REGIONALLY
The increase in stock holdings by U.S.-based managers was the first in five months.
On average, 13 U.S.-based fund management firms had 62 percent of their assets in equities in October, up slightly from 61 percent in the previous month.
They decreased cash holdings slightly to 3.3 percent from 3.4 percent. Their bond allocations were also trimmed to 29.3 percent in October from 29.9 percent in September.
Continental European fund managers lifted cash holdings to their highest in four years and cut allocation to bonds and stocks.
The monthly survey of 10 investment houses showed equity holdings fell to 43.5 percent in October -- their lowest since at least April 2004 -- from 43.7 percent in September.
Allocation to bonds fell to 37.5 percent from 38.6 percent. Cash holdings surged to 6.3 percent from 5.8 percent.
Japanese fund managers slashed their global stock weightings to three-year lows.
The average stock allocation for 10 fund managers fell to 52.3 percent in October from 55.2 percent a month earlier.
Bond allocations rose to 41.5 percent in October from 39.8 percent in September while the weighting for cash jumped to 6.3 percent, the highest level in nearly four years and up from 5.7 percent in September.
British fund managers continued to reduce their equity holdings having cut them to at least a four-year low the previous month.
The poll of 11 UK-based investment firms showed average equity holdings in a balanced portfolio fell to 60.9 percent from 64.0 percent the previous month while average bond holdings fell to 21.0 percent from 22.5 percent.
Cash weightings rose for the second month running to hit 9.3 percent, up from 8.2 percent.
(Additional reporting by Jennifer Ablan in New York, Natsuko Waki and James Molony in London, Shigeo Kodama in Tokyo, and Bangalore Polling Unit; Editing by Ruth Pitchford)
