Posted inEmerging MarketsEquitiesFRENELUX

French fund buyers plan return to emerging markets

While the region was very popular with French investors at the time of the previous Expert Investor France in June 2013, appetite dropped soon thereafter into negative territory as the emerging markets bonds and equity sell-off began.

Record popularity for emerging market debt

Emerging market corporate bonds sentiment is even witnessing a massive turnaround. A record 71% of interviewed fund selectors will increase their allocation to the asset class, up from only 9% in January. Paris-based fund buyers underpin their renewed love for emerging credit referring to the attractive starting yields after the large outflows the asset class witnessed over the previous months.

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Some fund selectors expect a good performance of emerging market stocks will benefit credit, while they stressed companies in the emerging markets seem to be in better financial health now as they have been deleveraging following the start of QE tapering last autumn.

Appetite for emerging market government bonds has also surged. Half of interviewees plan to increase allocation to the asset class, though most of them said they are keeping their allocation stable for now, and are waiting for the right moment to step in.

Asian equities back in fashion

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Also demand for emerging market stocks has risen, and is now back on last year’s level. Half of France’s fund selectors will increase their allocation to the asset class, though this happens from a low level. Most fund selectors that were interviewed are underweight emerging markets now, and consider stepping up again after the huge underperformance of the past 18 months. A further 25% keep their exposure unchanged. Asian equities are even more popular, with almost six in ten fund selectors increasing exposure during the next twelve months. 

Part of the Bonhill Group.