Investors waiting for Greek default: BofA poll

A large majority of global investors believe that Greece will default on its sovereign debt, with nearly three quarters of them expecting it by the end of next year's first quarter, a poll showed on Wednesday.

Bank of America-Merrill Lynch said its monthly survey of fund managers showed 85% expecting Greece to default with only 8% saying the country would meet its obligations.

Asked when the default would occur, a plurality of 31% said Q1 2012, with 18% picking November and the same portion choosing December this year.

In all, 72% believed there would be a default before March next year.

The poll did not go into detail about what kind of default would occur, but Gary Baker, head of European equity strategy for the US investment bank, said his team had the impression that investors were talking about a "managed" default rather than an unruly one.

Greece is already negotiating a 21% reduction in the value of bond held by investors as part of programme that also includes a debt buyback and bond exchange

But many people do not believe this will be enough and euro zone officials have suggested it could be between 30 and 50%.

A Reuters poll showed few investors willing to bankroll the euro zone's main bailout fund, the EFSF.

Nine out of 10 fund managers and strategists at firms running more than USD 2.5 trillion in assets said they were unsure of or had no interest in backing the bailout fund financially.

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Tail risk

The fear of defaults in the euro zone remains the biggest concern for investors, the BofA-Merril survey showed.

Some 60% of respondents picked European Union sovereign debt funding as the biggest "tail risk", although this had dropped somewhat from September.

Baker noted, however, that the fear of a hard landing in China's economy triggered by falling property prices was beginning to gain traction among the investors.

"The biggest tail risk identified by investors is euro zone debt," he said. "(But) China property is starting to show up on radar screens."

Otherwise, the monthly poll found:

-- Investor sentiment remained bearish, but was not getting worse from previous months.

-- Global growth expectations are weak, with almost a third of respondents expecting a recession within the next 12 months.

-- Cash holdings by investors are "abnormally" high, with underweight positioning on both equities and commodities for the first time since February 2009.