Hong Kong is the least popular stock market among Asia-Pacific investors right now, against a backdrop of negative sentiment on China and emerging markets generally, according to the December fund manager survey by Bank of America Merrill Lynch. 

Asia-Pacific fund managers have positioned Hong Kong on a z-score of -1.7 relative to history, which means that less money is flowing into the markets than previously. Hong Kong's Hang Seng index is down 2.77% for 2014, closing at 22,585 yesterday – a low last seen in May.

Australia and Singapore come after Hong Kong as the least favoured Asia-Pacific stock markets. 

Indian assets, meanwhile, are attracting the most demand, followed by Indonesia, the Philippines and China. Amid neutral sentiment on EM equities (a net 1% of fund managers are bullish), both Asia-Pacific and EM fund managers favour India above all, on the back of the 28% year-to-date return on the Sensex.

Rajeev Mittal, Asia chief executive at PineBridge Investments, argues that easing business regulation and fiscal reforms being pushed by new prime minister Narendra Modi will be positive for investment and consumption.

Markus Schomer, chief economist at PineBridge, said: “We do not expect a big bang, but look for a series of small steps that will improve the efficiency of the bureaucracy and reduce subsidies that stifle business activity. We expect India to post stronger growth rates in 2015.”

Also popular among EM and Asia Pacific investors is China, despite more fund managers expecting Chinese growth to fall (a net 40%, up from 34% last month). China achieved a z-score of around +1.3 and around +0.6 by from EM and Asia-Pacific investors, respectively.

Last week, China's central bank suggested that the country's sluggish property sector could drag the economy down. The People’s Bank of China (PBoC) expects growth to fall to 7.1% next year from an expected 7.4% this year. Others have argued that the actual figure is well below this, and actually closer to zero.

Moreover, the HSBC/Markit China manufacturing purchasing managers’ index slipped to a seven-month low of 49.5 as of Tuesday, below the 50 mark that indicates the sector is contracting.

But slowing growth has not dampened the market's appeal to Asia-Pacific investors, with the benchmark CSI300 index returning 44.22% year-to-date. This has been fuelled in part by the new Shanghai-Hong Kong Stock Connect scheme allowing direct investment in A-shares, and an unexpected PBoC interest rate cut last month.

Sector-wise, global EM investors are most bullish on technology stocks, with a net 55% of fund managers saying they are overweight the sector. This is followed by discretionary (net 23%) and telecoms (net 10%). Staples and energy are the least popular sectors, with a net 55% of fund managers saying they are underweight each.

Meanwhile, investors remain upbeat on Japan, with a net 40% of global investors overweight Japanese stocks, down slightly from a net 45% who were overweight last month.

This comes on the back of this week's landslide election victory by Prime Minister Shinzo Abe, which gives him four more years to effect structural change.

Re-election should give him the political clout to push through more pro-growth policies, including trimming corporate tax to 20%, enacting labour market reform and deregulating the energy and farming sectors, said Russ Koesterich, BlackRock’s chief investment strategist.

Favoured sectors in Japan include technology (with a net 75% overweight); autos (net 65%), followed by industrials, insurance and retail. The most under-owned sectors are energy (net -55%), utilities (net -45%) and pharmaceuticals (net -45%).

Turning to the year ahead, 67% of global fund managers see equities as the asset class likely to generate the highest returns in 2015, followed by 22% citing currencies and the same proportion citing commodities. Only 4% cited government bonds and 2% corporate bonds.

On the question of quantitative easing by the European Central Bank, an overwhelming net 63% of investors now think it will start sovereign bond buying by the first quarter of 2015, up from 41% last month.

The survey period was from December 5 to 11 and it saw 165 participants managing $446 billion responding to the global survey and 99 participants running $265 billion responding to the regional surveys.