Global investors remain optimistic about emerging market (EM) equities in 2010 and have forecast 9% total return for them in New Year, above 7.7% for global markets and 5.5% predicted for US.
A net 37% believe that EMs have the best profit outlook for the year, the best among four major regions and 25% think that they are undervalued, according to a global survey of 213 fund managers, managing $617 billion of assets, conducted by Bank of America (BofA) Merrill Lynch for December.
While investors are overweight on high beta (a measure of volatility) markets such as Russia and Brazil, they remain underweight on expensive markets like India and Taiwan. Investors in EMs have increased sector bets in December, showing a higher preference for energy, financials and industrial segments.
Global investors remain confident about a recovery in 2010. A net 80% of respondents expect the world economy to grow over next 12 months, compared with a net 69% in November.
Two-thirds of investors expect equity markets to return to traditional growth levels or better, the survey found.
Expectations for corporate profits surged 76%, the highest since December 2003. More than 70% of the global fund managers believe that corporate earnings can rise by more than 10% in the next 12 months.