Nineteen per cent of global fund managers remain bullish on India, suggests the latest BofA Asia Fund Manager Survey (FMS).
A total of 249 panelists with $656 billion worth of assets under management (AUM) participated in the survey between February 2 and 8, BofA said.
Two hundred and nine participants with $568 billion AUM responded to the global FMS questions, while 145 participants with $331 billion in AUM responded to the regional fund manager survey (FMS) questions, BofA said.
“The February FMS has chosen momentum over rotation across markets and sectors.
“The favorable views on technology stay intact, with semis at the helm yet again (cited by net 40 per cent of participants) while real estate (net 23 per cent underweight) stays out of favor.
“Among markets, investors prefer India and Taiwan (net 19 per cent overweight each) apart from Japan, while avoiding Thailand (net 17 per cent underweight) and China (-23 per cent),” the survey findings suggest.
At the global level, 61 per cent of the respondents remained bullish/long on a group comprising Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVidia and Tesla, popularly known as the ‘Magnificent Seven’ and was the most crowded trade.
Short China equities (25 per cent of the respondents) and long Japanese equities (4 per cent of the respondents) were the other most crowded trades, BofA said.
The China equity market, BofA survey findings suggest, failed to enthuse investors, with the majority willing to sit out/avoid the Chinese markets right now.
Nearly 15 per cent FMS respondents, BofA said, are looking to cut exposure on any bounce back.
“Tellingly, China allocation struck a new low as investors brace for a structural de-rating, given their belief that the propensity among Chinese households to preserve cash rather than spend/invest is here to stay,” BofA said.
The rising Sun
On the other hand, investors remained bullish on the road ahead for Japan with 29 per cent of the FMS respondents, according to BofA, expecting double-digit returns from their equity market in the next 12 months.
Twenty-five per cent of the respondents do not expect the Japanese equity markets to peak in 2024.
Earlier this week, Japanese markets hit a 34-year high with the Nikkei hitting the 38,000 mark – the highest it has ever been since January 1990.
“Japan remains a key overweight market at the global equity level with a TOPIX base-case target price of 2600 and a rising likelihood of our bull case of 2800 coming into play as fund re-allocations to Japan have been high year to date driving multiple expansion,” wrote analysts at Morgan Stanley in a recent note.
Once dubbed a ‘value trap’, investors, analysts believe, now harbor a clear value bias in Japan, as corporate governance reforms – slated to be the most closely watched event this year – take center stage.
“It is, by far, the favorite market in the region, as cited by net 56 per cent of investors, with a tilt towards semis and banks.
“Wage negotiations and Bank of Japan (BoJ) policy normalization is yet another topic of interest for investors, with the FMS looking for only a measured rise in the Shunto wage growth from 3.6 per cent in 2023 to 3.8 per cent this year,” BofA said.
Banks, semis, industrials, software, tech hardware and financial services are the top sectors investors are bullish on in the Japanese context, BofA said.
