Survey shows collapse in allocations to emerging market.
A Bank of America-Merrill Lynch (BofA-ML) survey has found that emerging markets, including India, have lost favour with most investors globally. More importantly, the survey has named India as the “least favoured” economy in the Asia-Pacific region.
“The February FMS (fund manager survey) showed a collapse in global investor allocations to EM (emerging market) equities. A net five per cent are overweight EMs, down from 43 per cent in January, the lowest level since March 2009. This is the steepest one-month fall on record,” says the survey report. An unusual shift in regional allocations accompanies this increase in risk appetite, it says.
The survey, however, adds that the immediate downside risk is low. “We believe that any immediate downside risk for EM equities is now low following capitulation. But we believe that a peak in EM inflation or upside surprises to China growth are necessary to provoke fresh inflows into EMs,” it explains.
In what would come as a disappointment for Indian investors hoping for a revival of inflows from foreign funds, the survey said that India was the least favoured investment destination in the Asia-Pacific region.
“Asia Pac investors leave market positions broadly unchanged. Allocations to their favoured markets are extended: Taiwan (+33%), Korea (+17%) and China (+13%). The least favoured remains India (-20%), Indonesia (-17%) and Australia (-13%),” says the Emerging Market strategy report from BofA-ML.
According to data available with the Securities and Exchange Board of India (Sebi), foreign institutional investors (FIIs) have been net sellers of nearly $1.6 billion in the current calendar year. In 2010, they pumped in a record $30 billion.
The survey reveals that investors are now increasingly taking a more positive stance on key developed markets. A total of 188 fund managers, managing a total of $569 billion, participated in the global survey during February 4-10.
“The appetite for eurozone equities has risen significantly — a net 11 per cent overweight in February, compared to a net nine per cent underweight in January. A net 34 per cent respondents are overweight on US equities, up from 27 per cent and 16 per cent in January and December, respectively,” it says.
Moreover, the US and eurozone were now the two regions investors would most like to be overweight on, it added.
A total of 154 managers, managing $384 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Research with the help of market research company TNS.
