Investors shun India, prefer China and Indonesia

Asia-Pacific and emerging-market investors are the most overweight China of all Asian countries, but heavily underweight India. Only 17% of respondents forecast a hard landing for China of sub-7% growth, according to Bank of America Merrill Lynch’s December fund manager survey.

This is against a backdrop of ever more negative sentiment over Europe; a net 35% of asset allocators are underweight the region now, up from 30% last month. Emerging markets and the US are the most favoured regions.

EM investors have gone from being a net 6% underweight India sharply up to a net 32% underweight, while a net 59% are overweight China (the same as are overweight Brazil and Russia), down from a net 70% in November.

A net 14% of Asia-Pacific investors are underweight India, up from a net 6% last month, but they have slightly increased their allocations to China, with a net 28% overweight the country, up from 26% in November.

Indonesia is another popular investment destination, with a net 42% of EM allocators overweight the country and a net 7% of Asia-Pacific allocators overweight it – both  figures are very slightly down on last month.

Malaysia remains very unpopular among both EM (net 66% underweight) and Asia-Pacific investors (net 12% underweight). 

The two groups disagree hugely on Taiwan, however: a net 58% of EM investors are underweight the country, while a net 8% of Asia-Pacific allocators are now overweight it, having switched from a net 6% being underweight in November.

Meanwhile, Asia-Pacific investors are a net 6% overweight Korea (a switch from a net 9% being underweight it last month), while EM allocators have increased from a net 7% underweight to a net 18%.

Europe remains the major worry among global allocators: a record number, a net 72%, say the eurozone has the least favourable outlook for corporate profits. Moreover, nearly half of respondents (48%) don’t believe a member state will announce its intention to exit the euro, although 33% says one will do so next year.

A total of 255 respondents with $762 billion of assets under management took part in the survey from 2 to 8 December. A total of 190 managers with $608 billion participated in the global survey and 137 managers with $332 billion in the regional surveys.