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Investors fled stocks in August

Investors took money out of stocks and piled into cash as market swung wildly. Stocks made up less than half of investors' model portfolios, according to poll of global investment houses.

By Jeremy GauntReuters European Investment Correspondent / September 1, 2011

A woman and a man are reflected on the window of a stock price monitor at a securities company in Tokyo last month. A Reuters poll found that investors globally moved into cash and left less than half their holdings in stocks during August.

Hiro Komae/AP

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LONDON

Global investors slashed their holdings of equities below 50 percent this month and piled into cash, reflecting what was lining up to be the worst August for world stocks since 1998.

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They also lifted exposure to bonds in North America, Britain and, to a lesser extent, the euro zone, where Germany is considered a safe haven.

Reuters polls of 57 leading investment houses in the United States, Europe ex-UK, Japan and Britain showed the average stock holding in a balanced or model portfolio falling to 49.2 percent.

It was the lowest since at least February 2009, when the current questionnaire was introduced. July's reading was 52.2 percent, the second month in a row that it had risen.

Bond holdings rose to 36.1 percent in August from 35.3 percent. Cash -- where investors go in times of trouble -- jumped to 5.8 percent from 4.5 percent.

The moves came as investors fled riskier assets because of signs that the global economy is worsening. The month also saw the credit downgrading of the United States and the euro zone debt crisis continuing.

"While we had been expecting a 'soft patch' in terms of economic data during the summer months, the weakness evident in many macroeconomic releases has proven to be greater than many market participants had predicted," said Paul Amer, investment manager at Insight Investment.

MSCI's all-country world stock index, one of the broadest gauges of world stocks, lost around 7.75 percent in the month with less than one day of trading to go.

This was likely to be the worst monthly performance since May last year and the worst August since 1998, when it dropped more than 14 percent during the Russian default crisis.

Among the most radical moves in the past month was that by Germany's Deka Bank, which dumped all its equity holdings.