NEW YORK, March 21 (Xinhua) -- Investors around the world have reassessed their risk appetite in the wake of the sell-off in stock markets that started on February 27th, according to Merrill Lynch's Survey of Fund Managers for March released on Wednesday.

    In the first comprehensive study of investor sentiment since the market decline, global money managers have revealed the full extent of their heightened aversion to risk.

    Portfolio managers have increased their cash balances sharply from 3.8 percent to 4.4 percent, with 30 percent of respondents saying they are cash-heavy.

    Merrill Lynch's Composite Index for Risk Appetite fell five points this month to record one of its lowest readings in the past five years.

    Furthermore, the survey suggests portfolio managers have their shortest investment time horizon in four years, with an average investment time horizon among the panelists of just seven months.

    "Investor visibility is at its poorest since the spring of 2003 when Iraq was invaded and fears of global deflation were high," said David Bowers, independent consultant to Merrill Lynch, one of the world's leading wealth management, capital markets and advisory companies. "That the risk has been re-priced is not a surprise. What is interesting is the extent to which this sell-off reflects a more fundamental reassessment by investors of global macro prospects." he added.

    The survey indicates strongly that the 3-percent fall in major market indices has failed to prompt investors to rethink their global macroeconomic outlook. While they are slightly more cautious about the prospects for economic growth and corporate profits, only 10 percent of panelists believe that a global recession is likely in the next 12 months.

    There is also evidence that the majority of investors has not abandoned equities. 34 percent of portfolio managers believe it unlikely that stock markets will be lower six months from now, up from 15 percent in February.

    Having taken refuge in cash, respondents plan to increase equity exposure: 25 percent of asset allocators intend to raise exposure to equities over the next three months. While investors are not concerned about the risk of a global macroeconomic slowdown, they believe that the U.S. Federal Reserve should be worried about its domestic economic outlook.

    Some 45 percent of asset allocators now believe that the Fed should be more concerned by the threat of slower economic growth; only 17 percent take the view that the Fed should be more worried by the threat of higher inflation ahead of the March Federal Open Market Committee meeting that concludes Wednesday.

    This is the most polarized view that investors have taken since Merrill Lynch introduced this question in August 2006.

    A total of 199 fund managers participated in the global survey from March 9-15, who manage a total of 668 billion dollars. A total of 173 managers participated in the regional surveys, who manage a total of 412 billion dollars.