A greater proportion of investors than ever before are now underweight emerging market stocks, according to Bank of America Merrill Lynch (Baml).
The bank’s latest global fund manager survey found a net 32 per cent of investors are underweight emerging market equities this month.
This figure is higher than the levels recorded during the China debt scare of March 2014 or the Lehman crisis in late 2008, according to Baml.
In addition, the survey added that more investors have said global emerging markets is the region they most want to underweight in future.
The change in sentiment is driven by continuing concerns over the Chinese economy.
A Chinese recession - while far removed from the picture portrayed by official figures - is now rated the number one “tail risk” by 52 per cent of managers surveyed.
Michael Hartnett, chief investment strategist at Baml, said: “Investors are sending a clear message that they are positioned for lower growth in China and emerging markets.”
Meanwhile, Europe is the region investors most want to overweight.
James Barty, head of European equity strategy added, “European stocks remain in favour – but investors like domestically focused names and are avoiding anything exposed to China or commodities”.
The energy sector also remains out of favour. Baml recorded a record amount of investors having an underweight to the sector, at 30 per cent.
Typical cash weightings, while down from the post-Lehman peak of 5.5 per cent reached last month, are still high at 5.2 per cent on average.
Overall, fewer investors are confident about economic growth. Just 53 per cent of investors expect the global economy to strengthen in the coming year, down from 61 per cent in July.
