Against a backdrop of economic crisis in the eurozone and monetary tightening measures in China, investors have grown more cautious globally, particularly with regard to China and Europe. This marks a significant switch from the heightened risk appetite seen last month.

According to Bank of America Merrill Lynch's fund-manager survey for February, a net 7% of global respondents expect China's economy to strengthen in the coming 12 months, down from 51% in January and the lowest reading since March 2009. This represents the sharpest monthly drop in this figure ever recorded by the survey.

Global asset allocators are underweight the eurozone for the first time since September, with a net 11% reporting underweight positions, up from 2% in January, with European banks seeing particularly big outflows. European portfolio managers are also less bullish on their home region's economy, with half (51%) expecting it to grow in the coming year, down from 74% last month.

Growth expectations are still high, with a net 80% of global investors optimistic, but that figure has dropped from 89% last month.

Another indicator of a more conservative approach is that a net 33% of global asset allocators were overweight equities this month, down sharply from 52% in January. Moreover, a net 12% are now overweight cash, up from 8% last month, while just 10% are overweight commodities, down from 23%, which the report sees as "a nod to changing China sentiment". In addition, hedge funds have scaled back leverage to less than 1x from 1.33x.

Turning to currencies, a net 57% of investors are optimistic on the US dollar, the highest level for 10 years, and a net 45% feel the currency is undervalued. The yen is viewed as the most overvalued it has been since BoA Merrill began conducting the survey in April 2002, while sterling is seen as fairly valued.

As for interest rates, a net 42% of global investors expect to see no US rate rise before 2011, up from 27% in January, while a net 45% of European investors expect no rate rise from the ECB before next year, up from 19% last month.

Interestingly, while global emerging-market (GEM) investors are downbeat on China, cutting their positions on China equities from around 10% overweight to neutral, Asia-Pacific investors have increased their weighting to the country to around 19% from 16% last month.

Still, both GEM and Asia-Pacific investors are increasingly bearish on India, with the former increasing their overweight position from around 42% to 60% and the latter switching from around 3% overweight to 9% underweight.

Malaysia remains the least favoured emerging-market among both GEM and Asia-Pacific investors, going from an underweight position of about 16% last month to 25% this month.

"February was a brutal survey period for returns across many asset classes," says the survey. "The central message from the survey was crystal clear in taking risk off the table on a re-evaluation of growth for China and Europe; most changes flowed from this theme -- dollar over euro, defensives over cyclicals/financials, cash over everything and a winding down of risk appetite to levels last seen in September."

A special question this month focused on the likely outcome for Greece's woes over a potential default. Two-thirds of respondents expect no Greek default, but the majority feel the bailout will be a last-minute one, says the survey, which "argues for further volatility before any resolution is found".

A total of 200 fund managers, managing $502 billion between them, participated in the global survey from 5-11 February. A total of 165 managers, managing $355 billion, participated in the regional surveys.