Global investors cashing out from emerging markets

An uncertain economic situation and volatile stock markets have prompted global investors to flee emerging market equities, says a survey.

According to the BofA Merrill Lynch survey of fund managers for June, global investors are deserting out of emerging market (EM) equities, and they slashed their position by half to 17 per cent, the lowest level since October 2011, and considerably below the long-term average of 26 per cent.

“A net 17 per cent of global asset allocators are overweight on Global Emerging Market equities, down from a net 34 per cent in May,” the survey says.

In fact, commodities have also lost favour as net 8 per cent of the panel is underweight on the asset class, the lowest reading since February 2009.

“Investors have taken money out of emerging markets equity funds for eight of the last ten weeks and by mid-month emerging markets  equities had erased all of their 2012 gains,” it adds. The BSE’s benchmark Sensex has lost around 540 points or 3 per cent since April to close at 16,880.51 points today. Foreign institutional investors (FIIs) withdrew a total of Rs 1,456 crore from equities in April-May this year.

Besides, global equities are at their most undervalued since August 2011 and a net 48 per cent of those surveyed believe global equities are undervalued, matching the lowest level since the survey began.

The view is even more concentrated in Europe as a net 45 per cent of those surveyed see Europe as the most undervalued region, an all-time high reading and up from 27 per cent in May. In overall total of 234 panellists with $526 billion of assets under management participated in the survey from May 4 to May 10.