After the recent pullback in the equities market, bargain hunters may look to beleaguered emerging market stocks and region-related ETFs for cheap value.
According to a recent survey conducted by Bank of America Merrill Lynch, investor allocation to emerging market equities surged to 13% in November from 5% in October, the Wall Street Journal reports.
The iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG), the second largest emerging market-related ETF by assets under management, was among the most popular ETF plays over the past week, attracting $621 million in net inflows, according to XTF data. IEMG has brought in $945 since the start of the month.
The BAML survey suggested that investors capitalized on the recent pullback in during the equity market sell-off, with cash allocations among fund managers dipping to 4.7% in November from 5.1% in November – fund managers typically raise cash positions during periods of extreme volatility.
“We’re in the midst of a major reset of investor sentiment and positioning,” Michael Hartnett, Bank of America Merrill Lynch’s chief investment strategist, told the WSJ. “But the pain threshold hasn’t been breached yet.”
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On the other hand, many have been rotating out of the once high-flying technology stocks after the recent stumble in the tech sector. According to the BAML survey, allocations to global tech sector slipped to the lowest level since February 2009, with 18% of respondents indicating they were overweight the sector, compared to 25% last month.
As investors rotated out of the once hot sector, many have turned to cheap plays like emerging markets. Brian Sterz, portfolio manager at Miracle Mile Advisors, said his firm recently shifted more into emerging markets and developed international stocks.
“We want to buy things when they’re coming out of the doldrums and their valuations are cheap,” Sterz told the WSJ.
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