Fund Man­agers Turn­ing Bullish on Emerg­ing Mar­kets: BofAML Sur­vey

The Economic Times - - Companies: Pursuit Of Profit -

Mum­bai: A re­cent Bank of Amer­ica-Mer­ril­lLynch(BofAML) sur­vey showed that global fund man­agers’ al­lo­ca­tion to emerg­ing mar­ket eq­ui­ties has im­proved to net 5% over­weight in Fe­bru­ary from net 6% un­der­weight in the pre­vi­ous month, the big­gest monthly jump in 11 months.

The global bank said that the cur­rent al­lo­ca­tion is still 0.6 stan­dard de­vi­a­tion be­low the long-term av­er­age. The bank said the dol­lar is the main rea­son be­hind the shift in al­lo­ca­tion. “Feb FMS shows con­sen­sus strong $ view fal­ter­ing at mar­gin with ro­ta­tion to EM, en­ergy & ma­te­ri­als,” said BofAML in a note. The sur­vey showed that the cash level held by fund man­agers fell to 4.9% from 5.1% in Jan­uary but re­mained higher than the 10-year av­er­age of 4.5%.

In the last three months of 2016, emerg­ing mar­kets had seen sig­nif­i­cant out­flows due to the hike in in­ter­est rates and bond yields in the US along with Don­ald Trump’s prom­ise of a fis­cal stim­u­lus to bol­ster the econ­omy. The long US dol­lar is be­ing seen as the most crowded trade and the per­cent­age of fund man­agers who think that the US dol­lar is over-val­ued is the high­est since Septem­ber 2006, the sur­vey showed. The bank’s Fe­bru­ary sur­vey cov­ered 175 fund man­agers who have $543 bil­lion in as­sets un­der man­age­ment. The sur­vey also showed that 34% of the fund man­agers view gold as the best in­vest­ment bet if the world shifted de­ci­sively to­wards pro­tec­tion­ism, which is seen as the big­gest cat­a­lyst for a bear mar­ket. About 36% of the fund man­agers view the Euro­pean elec­tions rais­ing dis­in­te­gra­tion risk as the big­gest tail risk to mar­kets, while 32% see trade war as the big­gest risk.

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