Buyers put money to work in EMs but warn of 'real risks'

Increasing allocations

Fund selectors have been eyeing emerging markets for months as sentiment towards the region has improved during 2016, but now they are finally beginning to increase their allocations, despite remaining wary of possible downside risks.

Bank of America Merrill Lynch's September Fund Manager Survey revealed exposure to EM equities jumped to its highest overweight in three and a half years, from net 13% overweight in August to a net 24% overweight this month. Investors have been reassured by the weakening US dollar, recovery in commodities and stabilisation of the oil price, although the possibility of another rate hike in the US is casting a shadow over the positive outlook. The region has delivered strong performance, with the MSCI Emerging Markets index up 11.5% this year to 15 September, compared to a 17% loss in 2...