European fund selectors seem this time to be deterred by the previous years’ disappointing returns from the major emerging markets stock exchanges. Political unrest in Turkey and Ukraine and, notably, the depreciation of many emerging market currencies, have added to the negative mood.
For the first time since EIE began measuring the fund selector sentiment for emerging market equities in 2010, the number of people reducing their allocation to the asset class is on par with the number of people planning to buy. Previously, the buyers always outnumbered the sellers by a comfortable margin.
‘Trend will reverse’
While the number of bulls is decreasing and the amount of EM sceptics is on the rise, Allan Møller, Head of Fund Selection at Danske Capital, thinks this trend might well reverse soon. “Right now we are telling our clients neither to buy nor sell emerging market equities, but we might start being positive again in the short term. We see credit tightening by Chinese banks coming to an end, which should be beneficial not only to Chinese equities, but to risky emerging market assets in general.”