Global investors may have pared back their extreme underweight positions on emerging market equities, but they remain nowhere near overweight, according to Bank of America Merrill Lynch’s monthly fund manager survey. The asset class is seen as the most undervalued it has been in 13 years.

India is the most heavily favoured EM, with a net 44% of global EM managers overweight the market this month, up from around a net 10% being UW in March. China, Indonesia and Russia are the only other EMs with a net overweight among EM investors this month. 

Asia-Pacific investors, meanwhile, remain heavily overweight South Korea and Taiwan and slightly overweight the Philippines, while their least favoured markets are China, Indonesia and Malaysia.

A net 66% of global fund managers say the US is still the most over-valued equity market, little changed from March and February. That may help explain the refocusing on emerging markets – a net 55% think these are undervalued, up from 49% in March and the highest reading ever in this survey.

In addition, only a net 2% would like to underweight emerging markets, down sharply from 21% in March.

In Japan, the boost provided by the launch of ‘Abenomics’ over a year ago continues to wane. Only a net 13% of investors are overweight Japanese equities, down from 16% in March and 30% in February. Similarly, a net 16% have a favourable outlook for Japanese profits, down from 18% in March and 28% in February.

Meanwhile, there was a big change in sentiment among global investors on value and growth stocks. This month, a net 40% believed value stocks will outperform growth stocks over the next 12 months, more than triple the level in March and an all-time high.

The preference for value might offer one clue to the recent sell-off in technology and biotech stocks. “Recent market volatility has led investors to ‘taper’ their extreme bullishness on US growth plays and extreme bearishness on emerging markets,” says Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch Global Research.

An overall total of 239 panelists with $674 billion of assets under management participated in the survey from April 4-10. A total of 188 managers, managing $546 billion, participated in the global survey. A total of 120 managers, managing $265 billion, participated in the regional surveys.