The survey, carried out by Societe Generale among 84 clients in Asia, Europe and the US in February, showed 39.3% of clients were bearish for the 2-week horizon, versus 38.1% bullish.
A previous survey in January showed that for the 2-week outlook the population of bearish investors grew in size, with some 22% of emerging markets investors bearish in the near term, as opposed to some 15% a month earlier.
Out of the 84 clients surveyed in February, 44 were hedge funds and 40 were real-money investors such as pension funds. Bullish sentiment still prevailed for real-money investors, with bulls accounting of 42.5% of them, while in the hedge funds group 40.9% of them were bears.
The size of the neutral investor population for emerging markets increased to 22.6% from January’s 16%.
The survey’s short-term sentiment indicator turned negative in February for the first time since June 2012.
The conviction level – how strong the bullish or bearish sentiment is - is measured on a scale from -5 (maximum bearish) to +5 (maximum bullish).
In response to the question “what is your sentiment towards global emerging markets over the next two weeks” the average score for all combined investors was -0.13, a sharp fall from January’s +0.78. It was +1.15 in December.
“This is highly significant in our view, as it illustrates a severe collapse of sentiment towards emerging markets in just a few months,” the Societe Generale analysts who carried out the survey said in the statement with the results.
STILL BULLISH LONGER TERM
For the 3-month horizon, investors are still bullish on global emerging markets but to a much smaller extent than in January, with 65.5% saying they were bullish compared with 80.2% in the first month of the year.
“In addition, the group of bearish investors continues to grow in size, with 23.8% of total investors being bearish on global emerging markets over a 3-month horizon, against only 12.3% in January,” the Societe Generale analysts said. In terms of positioning, investors were already cutting risk-taking in January and this trend was even more pronounced last month.
The distribution of scores in terms of positioning is now “skewed towards a more neutral risk-taking,” with only 57.1% of total investors now running positive risk, down from 69.1% in January, the survey’s authors said.
There are now more investors who feel they are over-invested – meaning that their risk-position should be reduced if they were to be aligned with their sentiment – than the opposite, with 45.2% feeling they are over-invested versus just 29.8% who feel they are under-invested.
“This is potentially negative for global emerging markets as it points to the need for higher bearish risk-taking,” the Societe Generale analysts said.
Among hedge fund investors, 61.4% are perceived as over-invested against only 15.9% under-invested.
But among real-money investors the picture remains favorable for emerging markets, with 45% feeling they are under-invested compared to 27.5% believing they are over-invested.
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