Money managers less bullish on China, India
With concerns about overheated economic growth and monetary squeeze tightening fund managers are cutting their exposure to high-performing emerging markets like China and India, says a report by Merrill Lynch.
Money managers are instead stepping up their investments in Taiwan, Korea and Thailand, according to the latest monthly survey of Pacific Rim fund managers by the Wall Street giant.
"Within the region, the most notable shift is from China to other North Asian markets, as investors anticipate further Chinese tightening measures after the lunar New Year," says Willie Chan, a strategist at Merrill Lynch.
According to the survey, 23% of investors expect the Chinese economy to get a little weaker over the next 12 months, while 58% expect it to stay the same. On the other hand, Taiwan has become the favorite market in the region. A net 25% of fund managers say they would increase exposure to Taiwan, up from 21% in January. Taiwan and South Korea both recorded more than US $1bn in foreign net inflows last month.
Investors have reduced their exposure in Indonesia and Singapore, and have instead put US $620mn into Southeast Asia's big laggard - Thailand, says Merrill Lynch. Only 3% of managers say they would reduce exposure to Thailand, down from 21% in January.
Only 15% of investors say they would increase exposure to Singapore, down from 24% in January. Eleven percent of managers also say they would reduce exposure in Indonesia. In contrast, in January 3% of managers said they would increase exposure to the nation.
India is the only Asian market to record net foreign selling last month, says Merrill Lynch. The US investment bank expects higher inflation and more tightening in India this year. A net 5% of fund managers say they plan to increase exposure to markets like Vietnam and Pakistan, over the next 12 months.