Global investors reduce exposure to emerging markets: Survey
Uncertain economic situation and volatile stock markets have prompted global investors to flee emerging market equities, says a survey.
New York: Uncertain economic situation and volatile stock markets have prompted global investors to flee emerging market equities, says a survey.
According to the BofA Merrill Lynch survey of fund managers for June, global investors are deserting out of emerging market (EM) equities and they slashed their position by half to 17 percent, the lowest level since October 2011, and considerably below the long-term average of 26 percent.
"A net 17 percent of global asset allocators are overweight on Global Emerging Market equities - down from a net 34 percent in May," the survey said.
In fact, commodities have also lost favour as net 8 percent of the panel is underweight on the asset class, the lowest reading since February 2009.
"Entering June, EM had been one of the last pockets of risk exposure for many global investors. But escalating threats to the fragile European financial system, volatile markets, and weaker macro data took their toll on appetite for EM," the report said.
"Investors have taken money out of EM equity funds for eight of the last ten weeks and by mid-month EM equities had erased all of their 2012 gains," it added.
The BSE's benchmark Sensex has around lost 540 points or three percent since April to close at 16,880.51 points today. Foreign institutional investors (FIIs) withdrew a total of Rs 1,456 crore from equities in April-May this year.
Besides, global equities are at their most undervalued since August 2011 and a net 48 percent of those surveyed believe global equities are undervalued, matching the lowest level since the survey began.
The view is even more concentrated in Europe as a net 45 percent of those surveyed sees Europe as the most undervalued region - an all-time high reading and up from 27 percent in May.
In fact, average cash balances among global fund managers "surged" from 4.7 percent in the previous survey to 5.3 percent this month, the survey shows. This is the highest level seen since January 2009.
In overall total of 234 panellists with USD 526 billion of assets under management participated in the survey from May 4 to May 10. The survey was conducted by BofA Merrill Lynch Research in association with the market research company TNS.