Concerns about emerging markets and China have rattled global investors’ confidence in the world’s economic outlook and prompted them to adopt a “risk-off” stance, according to BofA Merrill Lynch’s latest fund manager survey.
Participants in the survey, released Tuesday, expressed increasing worries about the threat of a recession in China. In last month’s survey, more than half of fund managers said they considered China the biggest “tail risk.”
(On Monday, Citigroup’s top economist, Willem Buiter, reported that the bank put the odds of a global recession led by China at 40%.)
Investors’ sentiment toward global emerging markets soured further in September out of concern over a potential debt crisis. Underweights were at a record net 34%, up from net 32% in August.
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Asset allocators’ risk appetite significantly ebbed since August, with equity overweights down a net 24 percentage points in a month and commodity shorts extended.
In addition, hedge fund net exposure and perception of market liquidity conditions in September were both at the lowest level in three years.