Emerging markets: a hope for investors

Emerging markets are still a hope for global investors. According to the last Bank of America Merrill survey with fund managers around the world released today, global investors remain overweight in emerging markets equities - a net 19% are still overweight in these countries. However, the number is lower compared to the first half of this year and slightly below the long-term average of 26%. And, for the fourth consecutive month Asia investors report more optimistic expectations for Chinese growth over for the year ahead.

The bad news is manager’s sentiment has deteriorated further despite a rally in equities and commodities since the last Bank of America Merrill Global Fund Manager Survey in June. Although a combination of 11 global rate cuts since the start of June and policy stimulus, fund managers remain conservative in their behavior. Investors continued to revise their expectations for global growth over the next 12 months (net 13% expect global growth to weaken) and maintain defensive allocations in July. 

On the other hand, two unexpected rate cuts out of China and pro-growth rhetoric from leaders have buoyed Chinese growth expectations. A net 6% of Asian investors now believe the Chinese economy will be stronger in 12 months time. Though investors may be more constructive on Chinese growth over the next 12 months, they still reduced their exposure to Chinese equities. In July, fund managers were neutral on China – the lowest weight since October 2010. Nevertheless, the sentiment on Russia and Turkey has improved: these two countries were the largest net overweight positions this month. 

According to the BofA Merrill Lynch survey, Russia is the favorite market for emerging market investors - 36% of the respondents pointed Russian market where there are better opportunities, followed by Turkey, Korea and Brazil.

The research was conducted from 6^th to 12^th July, and 261 executives participated of the global survey. The figure shows investors maintained their “risk-off” positioning in July with still lower equity allocation and high cash balances (4.9%).


Fund Manager Survey Global

Fund Manager Survey Global Emerging Markets