Copying and distributing are prohibited without permission of the publisher
Great rotation into stocks continues
13 August 2013
Global fund managers are becoming increasing confident in the global economic recovery but GEMs remain unfashionable, according to survey. Alastair O'Dell reports
Fund managers globally are becoming increasingly confident about global growth prospects, according to the Bank of America Merrill Lynch (Baml) Fund Manager Survey.
In August 72% of respondents expected the world economy to improve over the next 12 months up from 52% in July. It is the strongest reading in almost four years.
Confidence in the US and increasingly the EU economies is strong but this has not transferred to emerging markets.
While fears that China will experience a hard landing are receding – a net 32% of respondents expect Chinese growth to weaken, compared to 65% last month – allocations are a net 19% underweight across global emerging markets (GEMs).
This may signal a contrarian buying opportunity, according to Baml, especially as more than three quarters of specialist fund managers view GEM markets as undervalued.
“While global growth expectations have risen very rapidly, the good news is that cash levels remain high. Out-of-favor emerging markets offer some enticing opportunities to deploy these balances,” said Michael Hartnett, chief investment strategist at BAML Global Research.
The trend in sentiment towards emerging markets is still declining however, with confidence declining further since July to a two-year low.