Investors are bullish on emerging markets once more

Bullish on emerging markets, both for the short term and for the longer term, investors favour stocks in this region, a survey by Societe Generale shows.

On a two-week horizon, 48.1 percent of the investors surveyed showed a bullish bias for emerging markets, while 35.6 percent were bearish.

For the medium term (three months), 55.2 percent of investors were bullish on emerging markets, versus 35.6 percent bearish.

The survey was carried out by Societe Generale’s research division in December among 43 hedge funds and 44 real money investors such as pension funds or sovereign wealth funds.

The analysts noted a major difference between real money investors and hedge funds, with the latter being “considerably more bearish” than the former.

Bearish hedge funds made up 44.2% of the total hedge fund sample, compared with 27.3 percent for the real money sample.

Investors have however pared back their positioning in emerging markets in December from November.

Just 52 percent of them were running positive risk – long for hedge funds, or overweight for real-money investors – compared with 61.9 percent in November. The percentage of investors that were underweight emerging markets was 30 percent in December.

Another worrying sign for emerging markets is that more investors felt that they were over-invested – in other words, that their position should be reduced if it were to be aligned with their sentiment.

“Overall, this is quite negative from a technical standpoint,” said the Societe Generale analysts.

Specifically, 44 percent of the total investors felt they were over-invested, versus 26 percent who felt they were under-invested in emerging markets and 30 percent being neutral.

Among hedge funds, 49 percent felt they were over-invested, while the percentage was 39 percent for real money.

Equities remained the preferred asset class for investors in emerging markets, followed by external debt and local debt.

Foreign exchange was the least preferred asset class in December.


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