LONDON, Oct 17 — A record number of investors think emerging market currencies are undervalued, Bank of America Merrill Lynch's October fund manager survey found yesterday.
Crumbling under pressure from the strong US dollar, along with crises in Turkey and Argentina, developing market currencies have cratered this year. More recently they have been hit by a sharp stocks selloff, leaving MSCI's emerging currency index down 4.5 per cent on the year and 7.4 percent off March peaks.
A net 51 per cent of investors surveyed by BAML said they thought emerging market currencies are undervalued — the cheapest valuation since the survey began.
More than 20 per cent of investors said the US dollar was significantly overvalued, meanwhile, the second highest US dollar valuation reading.
Allocation to emerging market equities rose 15 percentage points, having hit its lowest since March 2016 in last month's survey. BAML strategists put the increase down to investors betting the US dollar has peaked.
“October rotation shows buying of peak US dollar assets via EM, energy and commodities and selling of cyclicals and growth,” they wrote, adding that buying EM assets was a key contrarian trade.
The survey, conducted October 5-11 and canvassing investors managing US$646 billion (RM2.68 trillion), also found investors were the most pessimistic about the global economy they had been since November, 2008. — Reuters
