TheEdge
KUALA LUMPUR: Fund managers have recently shifted their investment focus to Europe, the Middle East and Africa (EMEA) away from Asia, especially China, according to one Bank of America Merill Lynch (BOA-ML) survey.
It said based on its August survey, there was a "big rotation" to EMEA and away from Asia.
In a statement last Thursday, the bank said the main driver of this investment pattern was the "switching" to Russia and out of China, which saw its stock market entering bear territory last week, having plunged over 20% from the year’s peak.
A total of 204 fund managers, managing a total of US$554 billion (RM1.95 trillion), participated in the global survey from Aug 7-12. A total of 177 managers, armed with US$370 billion, participated in the regional surveys.
BOA-ML noted that in two years, China saw the lowest number of overweight positions by fund managers while South Korea got its first overweight call.
It added that investors had also sharply cut exposure to Chinese equities to "neutral".
The survey also showed more investors were becoming less optimistic in August on China economic growth compared to June while optimism on European growth prospects surged in August.
The most favoured global emerging market (GEM) markets are growth or liquidity plays such as Russia, Turkey, and Indonesia while the least favoured are the defensive markets such as Chile and Malaysia.
On specific sectors, BOA-ML said "consumer discretionary" and financials were the only sectors tagged with overweight calls.
"Most unloved sectors in GEM portfolios are utilities and healthcare," it said, adding that TECHNOLOGY [] stocks were the strongest engines behind the early recovery of GEM markets.
BOA-ML said globally, technology too remained the number one sector, with 28% of the global panel putting an overweight stance on the industry.
The bank said investors within GEM were positive about banks with a net 17% of fund managers in the regional survey overweight on bank stocks. It said 60% of the fund managers believed global corporate earnings could rise by over 10% over the next 12 months. Interestingly, it added, balance sheet repair was becoming less of a concern to investors.
Meanwhile, on the local front, fund managers like HwangDBS Investment Management Bhd is also bullish on finance stocks.
Its head of equities Gan Eng Peng told The Edge Financial Daily that the finance sector offered one of the best exposures to the economic recovery story.
Gan said despite a recent increase in volatility within the financial sector, valuations remained attractive over the next one to three years.
"Even at current valuations, the global financial sector represents a window of opportunity which has not been open for the last 10 to 20 years," he added.
Gan said as for the PLANTATION [] sector, shares of large-cap plantation companies in Malaysia had hardly corrected and their valuations remained too high.
"We think investors can get much better value and faster returns in the Indonesian names listed in Singapore," he added.
Gan said it also remained positive on the CONSTRUCTION [] sector, as it had performed relatively well in the current market rebound.
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