BoA increases holdings of emerging market stocks

Korea Economic Daily

Summary

BoA fund managers reported increasing their allocation to emerging market stocks.
Fund managers expressed an optimistic outlook for China’s economic growth and a weakening U.S. dollar.
A majority of respondents evaluated that emerging market stocks are undervalued, which was cited as a factor increasing their investment attractiveness.

Positive outlook expected from China’s economic growth and a weaker dollar

Amid growing concerns about U.S. stock overvaluation, BoA fund managers have been increasing their allocation to emerging markets. According to the Financial Times (FT) on the 11th (local time), the percentage of respondents in BoA’s monthly fund manager survey who expressed a ‘weight increase’ opinion for emerging market stocks was 37% points higher than those who did not. This is the highest level since February 2023. Elias Ghaly, a senior investment strategist at BoA, stated, "Investors have a highly optimistic outlook on emerging market stocks," and explained, "This result is due to rising expectations for China’s economy combined with a weaker U.S. dollar outlook." BoA fund managers expect the dollar’s value may fall further.

Despite concerns that emerging market economies would be hit by tariff policies under the Donald Trump administration, the MSCI Emerging Markets Index has risen 19.2% year to date in dollar terms. Fund managers assessed that emerging market stocks remain undervalued. The difference between the percentage of respondents reporting undervaluation and overvaluation stood at 49% points, marking the widest gap in a year.

Han Kyungjae, reporter hankyung@hankyung.com