Investors shun India, prefer China and Indonesia

Allocators are heavily favouring emerging markets and the US over Europe, according to Bank of America Merrill Lynch’s monthly fund manager survey.
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.

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