Bearish sentiment among investors about the outlook for the global economy and corporate earnings has eased, according to the Bank of America Merrill Lynch fund manager survey for August. However, sentiment on Japan and the US has further worsened, while that on China and Europe has rebounded somewhat.

A net 5% of respondents say the global economy will improve in the next 12 months, a turnaround from July, when a net 12% predicted that the world economy would deteriorate. Sentiment on China growth has also improved, but is still fairly bearish. A net 19% predict a weaker Chinese economy in the coming 12 months, compared to a net 39% saying the same in July.

Still, global emerging-market investors remain net underweight China, having cut exposure since last month. Their allocations to other Asian countries remain fairly stable.

By contrast, Asia-Pacific investors have made significant changes to their portfolios, increasing their overweights to China and switching from underweight to overweight Hong Kong and Korea. But they reduced allocations to Indonesia and Singapore, shifting from net overweight to net slightly underweight those two countries. Exposure to New Zealand and Taiwan also fell.

Emerging markets remains by far the most favoured region, with the net number of investors overweight the region increasing to 38% from 34% in July and 31% in June. Sentiment is also improving on Europe, with investors switching from a net 10% underweight eurozone equities in July to a net 11% overweight in August, the most positive reading since October 2009.

Opinion on Japan and the US is rather less bullish. A net 14% of asset allocators are underweight US equities, compared to a 7% overweight in July, and a net 27% are underweight Japanese equities, compared to a net 11% underweight in July.

“The spotlight of investor pessimism has shifted away from China and Europe to Japan and the US,” says Michael Hartnett, chief global equities strategist at BofA Merrill Lynch Global Research. “Investors clearly remain cautious, so better news on US growth and fiscal policy would be a pleasant surprise.”

Globally, risk appetite rose a little, with asset allocators reducing their cash holdings. A net 7% were overweight cash in August, compared to 13% in July and 19% in June. There was an uptick in allocation to equities and a drop in allocation to bonds. A net 23% were underweight bonds in August, compared to a net 15% underweight in July.

With regard to currencies, the survey shows that asset allocators think the US dollar looks undervalued, while the Japanese yen is seen as overvalued. A net 23% of respondents view the dollar as undervalued, compared to just 3% in July. A net 62% see the yen as overvalued – a survey record – versus 55% a month earlier.

A total of 187 fund managers, managing a total of $513 billion, participated in the global survey from 6 August to 12 August. A total of 157 managers, managing $327 billion participated in the regional surveys.