BofA-ML survey shows China concerns receding, EM debt risks still weigh

Global investors still long on cash though fears of a recession in China have receded according to the latest global fund manager survey by BofA-ML (Bank of America Merrill Lynch).

The 'short EM equities' trade is now the most crowded in survey's history, BofA-ML said.

Compared to prior month's survey, positioning changes point to short-covering in resources sector and EM proxies along with increased allocations to UK stocks (2nd largest jump ever), energy sector, Eurozone assets and commodities.

Energy, materials and commodities remain underowned vs history, BofA-ML said, as worries over an EM debt crisis still entrenched.

Less than half the investors surveyed see Fed hiking rates in 2015, expectations are pushed out to H2 2016 or later.

At the corporate level, margin expectations have dropped to near 3-year lows while outlook for earnings has darkened too.

The percentage of investors demanding lower debt levels exceeds those seeing buybacks and dividends for the first time June 2010, signaling a key shift in what investors would like to see corporates do with cash flows.