Equities back in vogue, investors bullish on emerging markets

New Delhi: Equities are back in vogue as investors over the world have reposed confidence on this asset class and have significantly increased their allocations to emerging market equities, says a survey.

According to BofA Merrill Lynch survey of fund managers for February, a net 26 percent of asset allocators are overweight on equities, up from 12 percent last month amid improving market conditions and hopes of economic growth.

Commenting on the findings, chief Global Equity strategist at BofA Merrill Lynch Global Research Michael Hartnett said, “Improved liquidity has aided this rally, but it is important to emphasise that it also reflects improving economic sentiment. Hard economic data has to continue improving to sustain a recovery.”

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Allocations towards equities have made the largest one-month leap since the beginning of 2011 and emerging market equities have managed to catch the fancy of a fund managers worldwide.

A net 44 percent of asset allocators are overweight emerging market equities this month, up from a net 20 per cent in January, the report said.

A growing majority of 86 percent believe the Chinese economy is heading for a soft rather than hard landing.

Looking ahead, a net 36 percent of the global panel says that they would like to overweight emerging markets more than any other region. “… investors have expressed that they would like to underweight all other regions, including the US,” BofA ML report said.

The report further noted that this month the sentiments towards Europe has recovered from the extremely negative positions recorded in January’s survey. “A net 12 percent of European investors are now underweight banks - a positive swing of 38 percentage points from a month ago when a net 50 percent were underweight the sector,” the report said.

Regarding Japan, the report said even as economic sentiment among Japanese fund managers has soared, global investors have yet to make a concerted move back to Japanese equities.“Japan is now the least loved region in the survey for global fund managers, surpassing even the eurozone,” the report said. A net 81 percent of Japanese respondents expect the country’s economy to strengthen in the coming year, up from a net 47 percent last month.

Meanwhile, demand for commodities has risen. A net 10 percent of global asset allocators are overweight the asset class, up from a net 5 percent one month ago. An overall total of 277 panelists with $ 783 billion of assets under management participated in the survey from February 3 to 9.

PTI