The fund managers? sentiment towards India has improved ahead of the general elections slated to begin on April 7. ?GEM/Asian sentiment towards Indonesia, India and Mexico improves as they lead in the ?Race to Reform??, said a BofA Merrill Lynch fund manager survey.
As per the report, fund managers continue to see value in the emerging markets. A record net 49% of the fund managers believe that emerging markets are the most undervalued of the regions, compared to a net 36% in January.
However, fund managers remain wary of global emerging markets (GEMs) on account of the geopolitical tensions between Ukraine and Russia. ?The geopolitical issues keep asset allocations to GEM equities at record underweight levels,? the survey added.
The concerns over slowdown in China?s economy remain. ?China growth expectations fall to their lowest level since July 2013, which sees China & Hong Kong positions cut to UW by Asia investors,? the survey said.
According to fund managers, the tensions in Ukraine pose the major threat to financial markets stability. As much as 81% of investors said they see geopolitical risk posing a threat to financial markets stability ? more than four times the reading one month ago. Meanwhile, 27% of investors said that a geopolitical crisis is the biggest tail risk, up from 12% in February.
While fund managers are looking at ?reform? play in the emerging markets, they are looking at ?recovery? play in developed markets. ?The confidence is up in UK, eurozone & US stocks (US allocations at 7-month high). But Japan has been sold; ?overweight? drops to 12-month low,? the survey said.
Globally, the proportion of fund managers ?overweight? on equities has dropped by 9 percentage points month-on-month to a net 36%. Demand for protection against sharp falls in equity markets has increased to its highest level in 22 months.
