Investors hit the ceiling – Kommersant

International investors are concerned about the inability of the US Congress to agree on a debt ceiling. However, against the backdrop of the technical nature of this step, they are even more worried about the banking crisis, which could not be stopped completely. Under such conditions, managers increased the share of cash in portfolios and reduced investments in shares of US companies.

International portfolio managers take a negative view of the situation faced by the US Treasury when raising the debt ceiling. As a result, the risk of being unable to fulfill the obligations of the government of the country since June this year, according to the May survey of portfolio managers conducted by analysts at Bank of America (BofA), was included among the key risks with unpredictable consequences for the global economy. This opinion is shared by 8% of respondents, and according to this indicator, he ranked fifth in the list of the main concerns of portfolio investors.

The need to raise the national debt ceiling through the US Congress arises every few years. But despite fierce debate and partisan divisions, legislators each time approved a new ceiling level. “If you approach the issue rationally, it is very difficult to believe that American lawmakers will not be able to agree on an increase in public debt, knowing about the risks that such an event will carry for the US economy, and for the global economy as a whole,” the analyst notes. KSP Capital Asset Management Mikhail Bespalov.

According to Dmitry Terpelov, Asset Manager of Sistema Capital Management Company, the consequences of the lack of an agreement in the form of an urgently forced reduction in government spending, a default (even a technical one) are unprofitable for any of the parties, therefore, “most investors believe that the ceiling has been raised.”

At the same time, according to a BofA survey, 71% of managers believe that the situation will be resolved before the US Treasury runs out of funds to pay obligations. In April, 80% of respondents expected such an outcome. The last time the US government stopped funding state programs and sent a third of civil servants on forced leave was in October 2013 (see Kommersant dated October 2, 2013). After 16 days, the debt ceiling was then raised, but such a simple one did not go unnoticed either for world markets or for the US economy. Ten years ago, analysts at the Standard & Poor`s rating agency estimated the loss of the American economy at $24 billion.

Therefore, more significant concerns among investors are caused by a banking credit crisis and a global recession, high inflation and geopolitics. In May, only 33% of respondents named the banking crisis as a key risk (in April it was 35%). Only 29% of portfolio managers fear high inflation against 34% in April. The deterioration of geopolitics frightens 15% of respondents against 11% a month earlier.

“Against the background of the stabilization of the dynamics of deposits and data on consumer and industrial inflation going in the right direction, the level of fears has slightly decreased, although it still remains high,” Dmitry Terpelov notes. In his opinion, the next big risk may lie in the high exposure of individual regional banks to the troubled commercial real estate sector.

Under such conditions, managers increased the share of cash in portfolios from 5.5% to 5.6%. “Despite the low probability of a default in the US, against the backdrop of high rates and fears of a future recession, the market has enough reasons to worry, so going into cash does not look like something unusual,” says Mikhail Bespalov. The number of portfolios in which investments in shares were below the indicative level was 24% higher than the number of those in which the share was higher. Over the month, the indicator fell by 5 percentage points. Investors are most likely to reduce the share of American stocks. In April, the number of portfolios in which their share was below the indicative level was 39% higher than the number of those in which it was higher. Over the month, the number of pessimists increased by 5 p.p.

Events on the US market do not yet have a strong negative impact on the Russian stock market. However, the development of the banking crisis and the possibility of a default could accelerate the recession in the West, said Sergey Suverov, investment strategist at Arikacapital, which could lead to a significant drop in oil prices and thereby affect the Russian market.

Vitaly Gaidaev