beyondbrics

Investors may be getting out of most emerging markets, but they seem to be doubling up on those they still like. February’s survey of fund managers from Bank of America Merrill Lynch shows a collapse in overall allocation to emerging markets, but a significant increase in a handful of countries.

The big regional winners are in eastern Europe and the Middle East, while the big loser is Latin America.

On a country level, Russia stands out for its popularity. Eighty-eight per cent of survey respondents are overweight the market, up from around 50 per cent in January.

Turkey too is back in fashion, with 44 per cent overweight, up from around 20 per cent – a sign that a move to deter so-called “hot money” by cutting interest rates in December (and keeping them that way this week) is not necessarily working.

South Korea and China, which have both raised interest rates this year to tame inflation, are also seeing increasingly positive allocations .

On the negative side, most of the losers had been losing out already. India remains a heavy underweight – and its stock market, roiled by scandal and economic worry, has the dubious accolade of being the worst performing EM stock market of the year after Egypt.

Chile and Malaysia are also underweight.

Perhaps the biggest surprises are the turnarounds – Thailand and Brazil have both gone from strongly overweight to strongly underweight in the past month. This is the first time Brazil has fallen into the underweight category since BAML started the survey.

Related reading:
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