Emerging market investors continue to have a bearish outlook on the markets as uncertainty about global growth persists. According to a survey report of EM and Asia Fund Manager Survey by Bank of America Merrill Lynch, cash levels among fund managers continue to remain at five per cent.

However, the fund managers held overweight positions in the emerging market equities in November. “Sentiment also improved on China, where growth expectations became less grim and the vast majority of investors now expect a “soft” landing,” said the report.

While emerging market fund managers were once again overweight on consumer discretionary stocks, both global and EM fund managers were overweight on the energy sector in November. Utilities and the financial sectors were the least favoured by the investors.

“Stronger confidence in China's ability to avoid a ‘hard' landing was echoed by EM investors who raised their allocations to China (+69 per cent) to the highest level since May 2009,” said the report. Other country overweights included Russia, Indonesia and Brazil.

The Asia-Pacific investors were mostly overweight on staples, retail and auto sectors. However, underweight positions in insurance, industrials and materials were withdrawn. “Banks and utilities remain big underweights and are the most detested sectors in Asia-Pacific,” added the report.

China was the preferred overweight country among the Asia-Pacific fund managers, with the growth outlook for the country improving. Indonesia was next, followed by the Philippines and Hong Kong. However, fund managers were underweight on Korea and Australia which are now the least-preferred countries among Asia-Pacific investors.

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