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Survey: Investor sentiment neutral on emerging markets

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Survey: Investor sentiment neutral on emerging markets

Overall sentiment declined 10% in the third quarter of 2015.

According to a quarterly survey by financial firm Emerging Global Advisors, investors globally are taking a wait and see attitude when it comes to emerging markets. The EGA EM Investor Sentiment Survey score declined 10% from 550 in the third quarter of 2015 to 495 in the fourth quarter, indicating investors were neutral on EM.

Key findings:

Most investors allocate to emerging markets for growth and diversification."

  • Most respondents currently have either 5-10% (33%) or 1-5% (29%) of their equity allocation in emerging markets. Only 26% of respondents allocate more than 10% of their equity to emerging markets.
  • 49% say their current allocation is about the same as 12 months ago, while 37% say it is lower.
  • 47% of respondents have a neutral outlook on EM equities, with the remaining evenly split between a negative and positive outlook.
  • 59% expect to stay the course with their EM equity allocation over the next 12 months, while 33% expect to increase their EM equity allocation.
  • 91% identify growth or diversification as the primary reason for investing in emerging markets
  • Changes in valuations and commodity prices were the most cited triggers for changing EM allocations, followed by performance relative to other asset classes and technical factors (relative strength/momentum).

"The survey confirms that most investors allocate to emerging markets for growth and diversification," said Marc Zeitoun, Chief Product and Marketing Officer at Emerging Global Advisors. "Interestingly, although a third of the respondents indicated a likelihood of increasing their emerging markets allocation in 2016, many remain underweight the global opportunity emerging markets represent." According to the IMF and the World Bank, EM represents 40% of global gross domestic product and 25% of global gross market capitalization.

 

 

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