Emerging market equities a contrarian buy: global fund managers’ survey

The Bank of America Merrill Lynch survey of global fund managers for June shows a net overweight on emerging market equities for the first time since November. Global asset allocation to equities went up quite sharply in June, as fund managers reduced cash holdings. For emerging markets, positioning is still significantly below long-term averages, suggesting global emerging market equities are a contrarian buy, the bank said. The survey also says fund managers anticipate staying overweight emerging markets for the next 12 months. “The June survey shows that the asset class (global equity markets) is perceived as the second most undervalued in 13 years,” it says.

Fund managers are by far the most overweight on India among global emerging markets, the survey found. That overweight has increased substantially in June as well. The scope for increasing exposure to India could then be limited, although domestic equities will still gain from any overall increase in allocation to emerging markets.