BofA Poll Shows Bets Against Emerging Markets Are `Most Crowded'

  • Trade surpasses long dollar and short oil in monthly survey
  • Money managers are responding by boosting equity exposures

Are Investors Seeing Turning Point for Emerging Markets?

An increasing number of money managers worldwide think pessimism on emerging markets has gone too far, according to a survey by Bank of America Corp.

Asked what the "most crowded" trade idea globally was, 26 percent of respondents overseeing a combined $496 billion in assets pointed to bets against emerging markets, the New York-based lender’s Merrill Lynch unit said in a statement on Wednesday. That surpassed the number of money managers who picked long dollar trades or short oil positions, the survey showed.

More investors have been positioning themselves for further gains in developing-nation stocks during a rally in the past month that’s driven the MSCI Emerging Markets Index toward a bull market. While bearish money managers outnumbered their bullish peers for the 15th consecutive month, they cut their net underweight positions to 11 percent in March from 23 percent in February, according to the survey.

The findings represent "a contrarian bullish signal for emerging markets," Chief Investment Strategist Michael Hartnett, an author of the report, said by e-mail.

The MSCI Emerging Markets Index is on course for its first month of gains since October as oil climbed to $40 a barrel. Commodity-linked currencies including the Russian ruble and Brazilian real have surged more than 5 percent so far this month.

The share of respondents in the March 4 to 10 poll who said developing-nation currencies are undervalued climbed to a net 34 percent, the highest since May 2013, BofA said.

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