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Investors shed their optimism on emerging markets in the second quarter, according to the latest Citywire db X-trackers Emerging Market Sentiment Indicator, sponsored by exchange-traded fund (ETF) provider Deutsche Asset & Wealth Management.
In line with outflows from emerging markets in general, the sentiment indicator found that 41% of fund managers surveyed believe emerging market equities will outperform global equities over the next year, down from 48% in the first quarter 2013 survey.
The baseline for the recently introduced indicator is set at 1000, with readings above 1000 representing positive sentiment and readings below representing negative sentiment.
The latest report shows sentiment sitting at 998.59, down from the 1009 reading for the first quarter.
In addition, the latest survey also found that:
- Sixteen percent of fund managers surveyed plan to increase their allocation to China over the next six months, down from 34% in the first quarter 2013, while those planning to cut their allocation to the country has more than doubled, to 27% from 12%.
- While 32% of fund managers surveyed planned to increase their investments in India in the first quarter of 2013, this number fell to 13% for the second quarter. Those planning to cut their Indian exposure went from 11% in the first quarter to 26% in the second quarter.
- South Africa is the one emerging market country, out of 10 surveyed, to buck the trend, with 18% of fund managers planning to increase allocations in the next six months, compared with 14% planning to decrease their allocations.
Kai Bald, Deutsche Asset & Wealth Management’s Head of Public Distribution, Passive Investments, said: “The latest sentiment report is in line with the ETF flows we saw in the second quarter. It is however a forward-looking indicator, and by tapping into the thoughts of the professional investment community investors can use it either to position themselves in line with that sentiment, or be contrarian and go against the grain.”
Simon Klein, Deutsche Asset & Wealth Management’s Head of Exchange-Traded Products, EMEA and Asia, added: “Now more than ever, as investors re-assess their expectations for the emerging markets based on new growth trends, having a wide choice of underlying exposures available will be critical. It means investors can really target their investments.”
The Citywire db X-trackers Emerging Market Sentiment Indicator is formulated independently by Citywire, a financial sector publisher, through the surveying, quarterly, of 100 professional emerging market asset managers who collectively control around €250 billion of assets. The indicator is not designed to be an investable index, but to be used as a research and information resource.