Global investors are switching to lower-risk investments as the prospect of geopolitical instability grows, according to Bank of America Merrill Lynch's Fund Manager Survey for March 2014.
Responding at a point of growing tension in Ukraine, 81 percent of investors said they see geopolitical risk posing a threat to financial markets stability – more than four times the reading one month ago. At the same time, investors continue to express concern about the prospects for emerging markets, with sentiment towards China's economy falling further.
Investors have reacted by showing reduced optimism about the prospect for corporate profits globally, and by reining in risk. The proportion of investors taking lower than average risk in their portfolio has increased to a net 14 percent from a net two percent in February.
The survey also shows that sentiment towards global emerging markets is close to reaching a low, and the survey suggests improvement is in sight. While the view towards China has deteriorated further, investors see scope to return to the region.
A net 47 percent of regional fund managers in Japan, Asia Pacific, and global emerging markets expect China's economy to weaken in the coming year, up from a net 41 percent a month ago. On the brighter side, investors have indicated that they see value in the region. A record net 49 percent of the global panel believes that emerging markets is the most undervalued of the regions, compared with a net 36 percent in January.
An overall total of 241 panelists with USD636bn of assets under management participated in the survey from March 7-13, 2014.