Growing worries about India?s economic growth and currency risks have forced emerging market (EM) fund managers to significantly reduced their exposure to Indian equities, according to the latest edition of Bank of America Merrill Lynch?s (BofAML) fund manager survey.
Nearly 35% of emerging market investors are underweight on India according to the August survey of BofAML. Drop in India?s weightings ? along with Malaysia and Poland ? is the highest reduction in fund managers? weightings in this month?s survey. Nearly 15% of EM investors were underweight on Indian equities in the July survey, while only 7-8% of EM investors were underweight on India in June.
Exposure to emerging market equities also dropped to the lowest level since November 2001, as fund managers remained underweight on EM markets by 19%, the BofAML survey showed.
?Investors have remained stubbornly bearish on EM equities, as EMs and commodities are still seen as the biggest source of risk relative to the rest of the world,? stated the BofAML survey. Fund managers remained most underweight on South Africa (85%), followed by Columbia (approximately -55%), Taiwan (-33%) and Poland (-33%).
On the other hand, Russia topped the list among EM equity investments, with nearly 50% of them being overweight on the nation that is rich in natural resources. China obtained a close second position, with nearly 45% of EM investors overweight on China.
?Investor sentiment on Chinese growth and materials stocks ticked up modestly this month,? the survey highlighted.
Taking a contrarian view of sorts, EM investors have now cut their exposure to the consumer related sectors of healthcare, consumer staples and consumer discretionary this month. Meanwhile, materials, technology (highest reading on record) and industrials saw a notable improvement in sentiment.
