Across Italy, Spain, Belgium, Germany and the Netherlands, the number of fund selectors positive on emerging markets has fallen to record low levels. The fall has been particularly acute in the Netherlands, where the percentage of fund selectors positive on the sector has dropped from 45% to 31%, and in Belgium, where the percentage fell from 25% to just 7%.
The recent rout in emerging markets has left emerging markets looking cheap relative to their developed market peers, but this is still not luring investors. Recent data showing bad loans made by Chinese banks at their highest level since the financial crisis has done little to help sentiment. Weak economic data from Turkey has also knocked investor confidence.
Eurozone equities, particularly the periphery, have been the key beneficiary of the move away from emerging markets as investors have sought an equivalent home for risk assets. In Belgium, for example, investors moved from 42% positive on Eurozone equities in November 2013 to 79% in January. Swedish, Danish and Finnish investors also became more positive on the asset class.
There were signs of some improvement in sentiment towards more defensive markets such as the US, despite a long bull run in US equities and concerns on over-valuation. German, Belgium and Dutch investors all became more positive on US equities in the period from October 2013 to January 2014.
Emerging market equities have been among the weakest since the start of 2014. The average Latin American specialist fund has fallen 7.6%, while the average emerging market fund has dipped 3.6%. Emerging European specialist funds have also been weak, falling 4.4% on average. China and Greater China funds have lost money, but have generally been stronger than other emerging market funds.