According to the latest Expert Investor Europe data, some 60% of Belgian fund buyers will increase their allocation to emerging market equities over the next 12 months, compared to only 7% in February. Just 5% plan to scale down their exposure, while all of the interviewed fund selectors currently use the asset class. Sentiment towards EM stocks is now close to the all-time high recorded in January 2013, when three quarters of the country’s fund buyers were poised to increase exposure.
EM debt: least disliked bonds
While it is not uncommon for investors to start a renewed engagement with emerging markets by stepping up their investments in emerging market debt, this is not the case for the Belgian fund selector community.
More than four in ten of Belgium’s fund buyers are not even invested in EM corporate debt, while net sellers and non-users combined outnumber buyers for EM government debt as well. But if Belgian fund selectors were to increase their allocation to fixed income, they would likely do so using emerging market debt funds.
Compared to January, appetite for all bond categories has decreased. Developed market bond holdings will be mostly kept stable, presumably because fund selectors have reached their minimum allocation and can’t decrease further.
Steering away from high yield
One of the more striking results of the survey is the lost appetite for high yield bonds. Enthusiasm for the asset class decreased in an even more dramatic manner than in the same period a year ago, when it dipped from 22% buyers to 8%, following a period of increasing prices for high yield bonds. Belgian fund selectors now seem to believe high yield is too expensive, with 45% reducing exposure to the asset class, and only 5% still stepping up.
Developed equity sentiment erodes
The bullish sentiment towards emerging market stocks contrast starkly with decreased appetite for all other equity categories. The number of fund selectors increasing exposure to European equities more than halved to 30%, the lowest level recorded since records began in January 2012. Two thirds of Belgium’s fund buyers keep their allocation to European stocks unchanged, signalling uncertainty about the direction markets are taking. Sentiment towards US equities and Japanese stocks is now even net negative.