Fund managers rush to emerging stocks: BofA survey of global investors

Investors turned more optimistic about the global economy in February, flocking to emerging market stocks and cutting their cash holdings to levels last seen since before the war in Ukraine, a BofA survey of global investors showed.

The survey of 299 fund managers, with a combined $847 billion in assets under management, found investors were still broadly cautious, but less so than in recent months. 

Only 24 per cent predict a recession compared to 77 per cent who did in November, according to the survey conducted in the week to February 9.

Investors remain net overweight cash and underweight equities, but a combined index that measures growth expectations, cash allocations and equity allocations improved to its highest level in a year.

The survey reflects a broad sweep higher in share prices. MSCI’s all country world index hit a nine-month high on February 2, though has since softened a little. 

Those moves, said analysts, were largely driven by hopes that major economies would avoid a recession, while inflation would continue to fall, particularly in the US allowing the Federal Reserve to be less aggressive when it comes to monetary policy.

The survey found the percentage of investors who are overweight emerging market stocks increased by 51 percentage points from November 2022 to February, marking the largest three-month increase on record.

It also found that ‘long China stocks’ was now the most crowded trade along with long investment grade bonds, replacing long US dollar cash.

BofA noted however, that while investors were the least pessimistic since February last year, positioning was not optimistic enough to be a catalyst to sell.

The Findings

24% predict recession, down from 77%

51 percentage point increase in investors who are overweight on emerging-market stocks

‘Long China stocks’ replaces dollar as the most crowded trade