A survey of fund managers Bank of America Merrill Lynch shows that global fund managers have increased their exposure to emerging markets in October, even as they continued to tread cautiously.
The findings for India were mixed. Fund managers investing in emerging markets across the globe, continued to be underweight on India (-20%) in October, but to a lesser extent compared with September (around -40%). In contrast, fund managers investing in Asia-Pacific markets turned overweight on India (around +10%) compared to a 5% underweight position in September.
The survey says that the highest percentage of fund managers expect India to do well over the next 12 months. The last time Asia Pacific-fund managers were so bullish on India was in April 2010. So far in 2012, foreign institutional investors have net invested close to USD 18 billion in India equities.
A summary of the findings of the Merrill Lynch Survey:
* While fund managers raised their equity and commodity allocations in October, the mood in the room was hardly euphoric. Global fund managers finally raised their emerging market exposure this month: a net 32% reported overweight allocations, the highest level since May
* Among Global Emerging Markets (GEM) fund managers, aggressive overweight country bets were few and far between in October. The top three country allocations last month-Thailand, Russia, and Turkey-held on to their spots in October.
* Fund managers cut their allocations to China to neutral and yet again changed their minds on Brazil (this time underweight). South Africa and Taiwan are the least favoured.
*Asia Pacific investors cut allocation to China in half from +30% to +15%. The outlook for Australia also deteriorated to a four-month low (net 29% UW). But interestingly, India became the most favorite market since April 2010. Similarly, investors are the most optimistic on Thailand in more than four years.