Sluggish global policy and absence of a clear resolution to the European crisis kept investors risk-averse in December. High cash allocations were seen on expectations of slower global growth in 2012. Equity allocations improved modestly this month. Global investors continued to maintain an overweight allocation to emerging markets (EMs). While most fund managers expect Chinese growth to slow down in the next 12 months, at least 80% believe that China will avoid a “hard landing”.
Despite expectations for weaker growth in 2012, EM investors continued to become more constructive on energy. Consumer discretionary maintained its reign as the favoured sector. Financials slid with 50% of EM portfolio managers reporting an underweight allocation. At the end of 2011, investors were overweight on Brazil, Russia, China and Indonesia but underweight on India.
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Asia-Pacific investors boosted their overweight positions in energy and technology to 33% each. Investors scaled back their underweight positions in industrials and materials. Fund managers scaled back their exposure to utilities, telecom and banks.
Edited excerpts from a report by Bank of America-Merrill Lynch. Comment at firstname.lastname@example.org