The survey was conducted in January and shows that the percentage of bullish investors for a 3-month horizon fell to about 80% from December’s all-time high of 90% and that the bullish conviction has weakened.
The poll was conducted among 81 of Societe Generale’s clients in Asia, Europe and the US and the sample included 41 real-money investors such as pension funds and 40 hedge funds.
For the 3-month outlook, “the group of bearish investors now is getting bigger, with 12.3% of total investors being bearish on global emerging markets over a 3-month horizon – as opposed to 5.8% in December,” the bank said.
For the 2-week outlook “the population of bearish investors grew in size, with now some 22% of emerging markets investors bearish in the near term, as opposed to some 15% a month earlier.”
The conviction level – how strong the bullish or bearish sentiment is - is measured on a scale from -5 (maximum bearish) to +5 (maximum bullish).
The average score for all combined investors’ sentiment towards global emerging markets over the next 2 weeks fell to +0.78 from December’s +1.15, with hedge funds slightly more bullish than real money investors.
“This is barely bullish and probably falling into the ‘neutral’ territory at this point,” the Societe Generale analysts noted.
Even among the bullish investors, the average score fell markedly, to +1.97 from +2.39, “reinforcing the message that the bullish bias is weakening substantially.” For the 3-month horizon, the conviction level indicator also fell quite sharply, to +1.63 from December’s +2.52, with “no tangible difference” between hedge funds and real money investors.
But when comparing sentiment with views, there are more investors than in December who feel they are under-invested, which means that their risk position should be raised if they were to be aligned with their sentiment.
Of the total investors, 39.5% feel they are under-invested, against 33.3% who think they are over-invested.
“This is potentially positive as it points to the need for higher bullish risk-taking,” the bank’s analysts said.
Among real money investors, 51.2% are perceived as being under-invested versus 29.3% over-invested and 19.5% neutral.
For hedge funds, 37.5% feel they are over-invested, 27.5% under-invested and 35% neutral.
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