By Natsuko Waki

LONDON (Reuters) - Global investors were more upbeat on equities this month than at any time since early 2011, confident that liquidity will remain ample even though the Federal Reserve has started a debate on when to scale back stimulus, Reuters polls showed.

Monthly asset allocation polls of 56 investors across the United States, Europe and Japan, released on Thursday, also showed investors sticking with Japanese stocks in May despite recent volatility, with allocation to Japan at its highest in nearly a year.

Funds on aggregate lifted their equity holdings to 50.9 percent of their portfolios this month, the highest since February and up from 49.6 in April.

The measure of their overweight/underweight positions in equities rose to 1.1 from 0.8 last month for the highest reading since January 2011.

Equity markets were rattled after U.S. Federal Reserve Chairman Ben Bernanke said last week that a decision to scale back the Fed's $85 billion-a-month bond buying program could come at one of the central bank's next few meetings if the economy looked set to maintain momentum.

Investors are not panicking though because the policy-setting committee is divided on when to roll back and there's no sign the Fed will stop its bond buying program immediately.

Combined with expectations for decent global growth of more than 3 percent this year, investors would still prefer to buy risky assets such as equities.

"For now, the combination of likely-to-be extended central bank support, sufficient economic activity and a lack of sound investment alternatives keeps the risk-on mood alive," said Boris Willems, strategist at UBS Global Asset Management.

The poll was conducted between May 15 and 28, when global stocks measured by MSCI <.miwd00000pus> slipped from a five-year high as jitters grew the Federal Reserve may slow its bond-buying program.</.miwd00000pus>

Assurance from central banks in Europe and Japan that they will keep providing liquidity has helped to calm nerves.

Investors lifted their allocation to Japanese stocks to 15.3 percent of their equity portfolios, the highest since June 2012. On the other hand, allocation to Japanese bonds fell to 12.1 percent, its lowest reading since December 2011.

Despite a recent selloff, Tokyo is one of the best-performing equity markets this year, with Prime Minister Shinzo Abe's aggressive monetary and fiscal stimulus policy driving the benchmark Nikkei index <.225> up 30 percent this year.</.225>

Investors are looking for Abe to announce more steps in June and in July after upper house elections that should help resolve a deadlock in parliament.

"I think that will help to sustain the rally," said Kenichi Kubota, senior strategist at Tokyo Marine Asset Management.

JAPAN IN VOGUE

U.S. fund managers lifted their equity allocation to an average of 59.1 percent, the highest level since March. The largest increase came in Japanese stocks.

Their allocation to Japan rose to an average 7.5 percent of equity portfolios from 6.2 percent in April. The average allocation to Japan has nearly doubled in the past three months.

Japanese fund managers reduced allocations to domestic bonds to an 18-month low of 35.0 percent from 36.3 percent in April, in the wake of the Bank of Japan's bond-buying program.

Their domestic stock allocation climbed 0.1 percentage point to a nine-month high of 36.4 percent. Overall stock allocations rose to a six-month high of 41.8 percent.

Among European fund managers, equities accounted for 47.5 percent of investors' global balanced portfolios on average this month, the highest since February.

They are now the most overweight in equities since March 2011, having turned away from underweight positions in August.

British investors also boosted their investments in Japan, to the highest level in more than a year. The average allocation to Japan in global equity portfolios grew to 9.2 percent from 8.4 percent in April, compared with the last peak of 10.7 percent in April 2012. {GB/ASSET]

(Additional reporting by David Randall in New York, Tom Bill in London, Maria Pia Quaglia in Milan, Rahul Karunakar and Snehasish Das in Bangalore and Sophie Knight in Tokyo; Editing by Susan Fenton)

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