India, one of the worst performing markets in the current calendar year, features among the ‘least favoured’ investment destinations, according to a latest survey by global financial major Bank of America Merrill Lynch (BofA-ML). The silver lining, though, is that the number of investors underweight on India has gone down as compared to earlier months.
“India UW (underweight) is scaled back to -20 per cent, the lowest UW reading in over six months,” says the BofA-ML Fund Manager Survey. The least favoured markets are Malaysia (-53 per cent) and Taiwan (-47 per cent), it adds. Meanwhile, Russia (+67 per cent), Indonesia (+40 per cent) and China (+33 per cent) remain the most favoured markets. Though China’s positions are cut, those of Russia have increased.
In the Asia Pacific investor groups, India features among the ‘least favoured’ markets. “Asia Pacific investors have increased their preference for Hong Kong (+25 per cent), now the most favoured market in Asia, followed by China (+17 per cent) and Taiwan (+8 per cent). Least favoured markets remain Australia (-17 per cent), Philippines (-13 per cent) and India (-13 per cent),” it says adding that “Korea (-8 per cent) has moved to UW from neutral”.
The survey also highlights the fact that investors have scaled back risk taking in the past month, reducing exposure to equities and commodities while upping allocations to cash and bonds. A net 18 per cent of asset allocators are now overweight cash. This represents the highest cash overweight level since July 2009 and a sharp move upwards from last month’s reading of a net 6 per cent.
According to the fund managers, behind the shifts in allocations are concerns about sovereign debt funding in Europe, which investors have named as the biggest tail risk in this month’s survey. Investors have also lowered expectations of strong growth in global profits, but broad sentiment towards the global economy has stabilised, say the releases. While economic optimism is down, investors are not pessimistic enough to be calling for a third round of quantitative easing (QE3). Nearly two-thirds of the panel says they do not expect QE3.
The global fund manager survey further shows that emerging market still remains the most preferred region for equities though China’s growth expectations have dropped to the lowest reading since January 2009. “Regional allocations show a big drop in exposure to the euro zone and UK equities but Japan remains the most unloved equity region,” it adds.
