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Lots of cash, but emerging markets may not benefit much

Lots of cash, but emerging markets may not benefit much
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First Published: Wed, Aug 17 2011. 11 00 PM IST
Updated: Wed, Aug 17 2011. 11 00 PM IST
The Bank of America-Merrill Lynch survey of fund managers for August, which was carried out between 5 and 11 August and, hence, in the middle of the market crash, saw a sharp drop in allocations to the US, which fell from a net 23% of fund managers’ overweight in July to a net 1% underweight on concerns of lower growth. In contrast, as the chart shows, the fall in emerging markets allocations has been muted—from a net 33% overweight in July to a net 27% overweight, which is in line with the long-run average.
Also See | Lots Of Cash, But Emerging Markets May Not Benefit Much (PDF)
Interestingly, the negativity on the euro zone reduced a bit, with the underweight being cut—from a net 21% in July to 15%. The allocation to Japan remained more or less the same, but the UK saw a sharp increase in its underweight position. With cash levels with fund managers at 5.2%—the highest level since March 2009—and equity weightings at a mere 2% overweight (the lowest since May 2009) compared with a net 35% in July, the chance of a rebound in equities is high. But any bounce in emerging markets should be muted, simply because their overweight positions weren’t cut much during the panic.
Graphic by Sandeep Bhatnagar/Mint
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First Published: Wed, Aug 17 2011. 11 00 PM IST