BofA-ML survey: High cash levels offset risk of big correction
The survey shows that a net 14% are overweight on emerging markets in September, down from 17% in August
The Bank of America-Merrill Lynch (BofA-ML) global survey of fund managers for September shows that cash levels with funds are lower than they were in August, but even so, are ‘still too high for a big correction in risk assets (in the) near term’.
Investors are a net 1% overweight on US equities, a net 23% overweight on Japan, 16% underweight on UK, 18% overweight on the euro area, while a net 14% are overweight on emerging markets in September, down from 17% in August. Within emerging markets, India is the fourth-most overweight market among global emerging market investors.
Market positioning suggests that long UK and US, while a short on Japan would be contrarian plays. India will benefit if allocations to emerging markets, which are below historical averages, picks up. However, the September survey also shows that ‘excess longs in developed markets versus emerging markets have been cut decisively,’ which could limit the scope for further gains in emerging markets.
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