No question that investors are in the throes of passion over emerging markets. The latest Reuters asset allocation polls show investors pouring money into Asian and Latin American stocks in October to the detriment of U.S. and euro zone equities. Exposure to equities in emerging Europe, Asia ex-Japan, Latin America and Africa/Middle East rose to 15.6 percent of a typical stock portfolio from 14.3 percent a month earlier.
Investors love those emerging markets
No one flying to safety yet
Reuters asset allocation polls for January are out and — perhaps not surprisingly — show global investors cutting back a bit on stocks. That would be expected given that world stocks are heading for a negative month and the likes of emerging markets have had a few days battering.
What was perhaps most interesting, however, was the fact that the pull back was not accompanied by any flight to safety. Both bond and cash allocations also fell slightly. The money went into other assets such as property and hedge funds.
Conclusion? No one is panicking. Some, such as Charlie Morris of HSBC Global Asset Management, even reckon that January’s pull back is nice and healthy, taking the froth off the market.
Bear market rally/Bull market beginning?
Another month and another Reuters asset allocation poll. This time saw investors in United States, Europe and Japan lifting their equity holdings and cutting back slightly on bonds. Fits with what has been happening on global financial markets, where MSCI’s main world stock index is heading for its best month in at least six years.
So the big question is what happens now. Is this a bear market bounce that will soon dissipate? Or is it the start of something bullish that will last?
Ignoring the drumbeat?
Reuters released its February asset allocation polls today, showing an ever so slight increase in average holdings of stocks. The signficiance, however, was not in the small increase but in the fact that there was no decrease. February has not been kind to riskier investments, with a drumbeat of 
poor economic news combining with new fears about banks to send global stocks to fresh six-year lows.
Dig inside the various polls — they come from the United States, Britain, Japan and continental Europe — and you find different moods. Three-quarters of U.S. managers polled, for example, made no change at all in their allocations over the month. Europeans, meanwhile, are so gun shy that they are holding more than twice as much cash as their long-term average. Japanese investors were a bit more optimistic than a month earlier, apparently because fears of deep trouble in China are easing.
What it all says is that investors are generally sticking to the sidelines, but are not being particulary spooked by continuing bad news. So is that the bottom? Or maybe familiarity breeds contempt?
