Global Investing

SocGen poll unearths more EM bulls in July

July 12, 2012

These are not the best of times for emerging markets but some investors don’t seem too perturbed. According to Societe Generale,  almost half the clients it surveys in its monthly snap poll of investors have turned bullish on emerging markets’ near-term prospects. That is a big shift from June, when only 33 percent were optimistic on the sector. And less than a third of folk are bearish for the near-term outlook over the next couple of weeks, a drop of 20 percentage points over the past month.

These findings are perhaps not so surprising, given most risky assets have rallied off the lows of May.  And a bailout of Spain’s banks seems to have averted, at least temporarily, an immediate debt and banking crunch in the euro zone. What is more interesting is that despite a cloudy growth picture in the developing world, especially in the four big BRIC economies,  almost two-thirds of the investors polled declared themselves bullish on emerging markets in the medium-term (the next 3 months) . That rose to almost 70 percent for real money investors. (the poll includes 46 real money accounts and 45 hedge funds from across the world).

See the graphics below (click to enlarge):

Signals are positive on positioning as well with 38.5 percent of investors reckoning they were under-invested in emerging markets, compared to a quarter who felt they were over-invested. Again, real-money investors appeared more keen on emerging markets, with over 40 percent seeing themselves as under-invested. SocGen analysts write:

This is positive as it points to potentially higher risk-taking…On this basis one could argue that there is potentially a positive driver for (global emerging markets) if indeed real money investors re-establish their risk positions in the period ahead.

Interestingly SocGen’s head of emerging markets research, Benoit Anne, is out  of sync with his clients on this one. “Give me one single reason to be bullish on emerging markets,” he wrote earlier this week.  Macro data, policies, asset valuations  — all seem to be working against emerging markets these days,  Anne says, though he acknowledges that light investor positioning is a positive.  He adds:

In other words, to be bullish on emerging markets you need to ignore the short-term risks and project yourself far enough into the future.

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