By Mike Dolan
LONDON, Oct 29 (Reuters) - Top investors around the world rebuilt equity holdings during a shaky October for stock markets, boosting allocations from September's 7-month low and cutting bond positions to their lowest since December 2008, a Reuters poll showed on Thursday.
The poll of 50 fund managers from the United States, continental Europe, Britain and Japan -- conducted over the past two weeks of this month -- indicates that the recent correction in equity prices may be seen as a buying opportunity.
The poll's average equity allocation worldwide bounced back to 56.4 percent from last month's trough of 54.9, although it remained below the peak of 57.1 from August and an average for the 5-1/2 year history of the poll of 59.2.
The re-established equity positions came against a rollercoaster month for world stocks which, although broadly flat since Oct 1 levels, retreated sharply over the past fortnight from new 12-month highs set mid-month.
"Our marginal increase to U.S. equities stems from our view that the probability of a double-dip recession is low, given the backdrop of no pricing pressure," said Doug Gordon, investment strategist at Russell Investments in Tacoma, Washington.
That long-term confidence was reflected on both sides of the Atlantic. "We strongly think that growth is going to snap back," said Franz Wenzel, senior investment strategist with AXA Investment Managers in Paris.
And Japanese funds held their nerve on equity too.#
"Share prices will remain on a rising trend as corporate earnings continue to improve," said Masaru Yamagishi, chief strategist at Sumitomo Mitsui Asset Management, pointing out that some 80 percent of the latest U.S. earnings had beaten forecasts.
CAUTION ON BONDS
Notes of ongoing caution about the state of world markets was reflected in a bounce back in average cash positions to 4.6 percent this month -- its highest level since April and up more than a point from August's 2009 low of 3.3 percent.
However, the big loser was bonds, where allocations dropped almost two points to 33.9 percent -- their lowest since December of last year when the credit storm was at its height.
The cutback in bonds comes amid growing speculation about the timing of central banks' exits from super-loose monetary policies and against waves of new supply of government debt.
Many fund managers have also said they feel corporate debt markets are also close to fair value after steep rallies over the past six months.
This also reflected views in some quarters that the best of the equities rally this year was also finished as economies struggle with persistent joblessness.
"We have been selling into any rally because our feeling is that the rate of unemployment might get worse," said Keith Wirtz, chief investment officer at Fifth Third Asset Management, a Cincinnati-based firm that oversees $20 billion.
There was also concern the market may have fully priced in the earnings recovery.
Andrew Milligan, head of global strategy at Standard Life, said: "Investors should fasten their seat belts once again."
"There are risks that this (optimistic earnings outlook) cannot be achieved against the backdrop of tighter fiscal policy, continued problems with credit creation and debt servicing, and central banks withdrawing excessively easy monetary policies," Milligan added.
REGION TO REGION
U.S. fund managers slightly increased their exposure to stocks, the Reuters poll showed.
Based on 11 management firms interviewed between Oct. 16 and Oct. 28, they held an average of 64.5 percent of their assets in equities, compared with 63.8 percent a month earlier and 60.6 percent at the start of 2009. Managers held 30.2 percent of assets in bonds, down a touch from 30.3 percent in September.
British managers built their equity positions to 61.9 percent in October from 57.2 percent the previous month, with bonds down 4.4 percentage points to 22.1 percent. Cash was up almost a point to 5.4 percent.
Japanese fund managers also raised their average global stock weighting and cut the bond weighting in model portfolios for October. That poll of 12 fund managers, taken Oct. 14-26, showed their average stock allocations rose to 52.6 percent in October from 52.1 percent in September.
Continental European fund managers took more cautious steps in their portfolios in October, but also showed continuing confidence in a risk-rewarding investment backdrop of recovering growth and easy money.
The monthly survey of 16 major fund houses in the region showed holdings of equities rose on average to 46.9 percent of a typical portfolio from 46.5 percent in September.
Bond holdings also rose, to 41.9 percent from 41.4 percent but cash was cut to 4.7 percent from 5.1 percent. (Additional reporting by Jennifer Ablan in New York, Jeremy Gaunt and Chris Vellacott in London, Akiko Takeda in Tokyo and Bangalore Polling Unit; Editing by Stephen Nisbet)) (mike.dolan@reuters.com, +44 207 542 8488, Reuters Messaging: mike.dolan.reuters.com@reuters.net))