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em equity sell off belies manager bullishness

According to the Bank of America (BofA) Merrill Lynch Global Fund Manager Survey – a monthly poll of some 250 portfolio managers running combined assets of more than €500bn – a net 43% of respondents were overweight EM equities in February, the highest reading since early 2012.

However, as Expert Investor Europe reported last week, appetite for the asset class has since collapsed, driven primarily by renewed fears over a Chinese economic hard-landing. In June, a net 9% of fund managers were underweight EM stocks – the first negative reading since 2009.true

But the underweight positioning of portfolio managers is at odds with their bullish expectations for the asset class, as shown by the Expert Investor Europe Manager Sentiment Survey.

The survey, which aggregates fund manager forecasts across a range of indices, returned a reading of 40 for EM equities in June (see chart). A reading of 25 or more indicates that a strong majority of participants expect an asset class to return in excess of 5% over the following year.

Indeed, the latest reading is a continuation of bullish sentiment on EM equities which stretches back to March 2009, when survey participants expressed a neutral stance.

The Expert Investor Europe Manager Sentiment Survey is based on data gathered monthly by Skandia from fund groups operating in Europe. Participants in May were: Allianz Global Investors, Axa Framlington, BlackRock, F&C, Fidelity, Henderson, HSBC, Ignis, Invesco Perpetual, JP Morgan, M&G, Old Mutual Global Investors, Pictet, Schroders and SWIP.

Platinum members can view full results from the latest survey here.

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