Investors shun emerging markets, especially South Africa: BofA poll

Tue Feb 18, 2014 11:52am EST
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By Natsuko Waki

LONDON (Reuters) - Investors grew even more pessimistic about the developing world in February, with a majority saying the biggest threat to the stability of global financial markets was turmoil in emerging markets, a survey showed on Tuesday.

A monthly fund managers survey by Bank of America Merrill Lynch showed investors' cash balance jumped to 4.8 percent, the highest since July 2012, as investors remained concerned about over-stretched equity valuations.

A net 29 percent of investors are underweight emerging equities, a record low for the survey, which dates back to 2001. The net reading shows the difference between overweight and underweight positions. Some 175 people, who manage combined assets of $456 billion, were polled.

The main concern is coming from China's growth outlook. The number of investors expecting a weaker Chinese economy over the next year rose to a net 40 percent from 28 percent in January.

Growth expectations also eased at a global level. A net 56 percent forecast a stronger economy, down from 75 percent.

The possibility of China's hard landing or a collapse in commodity prices remained investors' biggest tail risk.

"Investors are moderating their global growth outlook a little bit. Investors are pretty much washing their hands of emerging market risks these days," said John Bilton, the European investment strategist at BofA-ML.

"You still have this underlying fear over China, specifically credit market conditions. We need to see more decisive action from the People's Bank of China. I would be looking for loan and money-supply data and commodity demand as a chance for EM to have a bit of catch up."   Continued...

A Bank of America sign is shown on a building in downtown Los Angeles, California January 15, 2014. REUTERS/Mike Blake