Fund managers buy into mid cap stocks

UK fund managers have been buying heavily into FTSE 250 stocks, reflecting renewed confidence in the economy, according to the latest Merrill Lynch/ Gallup industry survey, writes Lea Paterson.

The survey also revealed a general decline in enthusiasm for UK equities as a whole and a pessimistic view of Japan's economic prospects.

Trevor Greetham, global strategist at Merrill Lynch, said: "Medium-sized companies tend to be more sensitive to the domestic UK economy than their larger FTSE 100 cousins. The growing sense that the UK economy may not be slowing so rapidly after all may help to explain why fund managers are at last paying more attention to these stocks."

Thirty-eight per cent of UK fund managers said they preferred FTSE 250 stocks to FTSE 100 stocks, compared with 15 per cent last month.

The decline in buying interest in UK equities as a whole - buyers of UK equities now outnumber sellers by just 3 per cent - indicates that UK fund managers are now happy with their cash levels.