India remains investors’ largest overweight but this position has now been trimmed
for five consecutive months. In June, investors also reduced exposure to China
without significantly increasing exposure to any other country. As a result, our
analysis of the stock holdings relative to benchmark of more than 400 funds around
the world shows investors have reduced exposure to Asia in the last two months.
Investors are o/weight Discretionary, u/weight late cyclicals
Investors’ largest overweight sector positions remain Consumer Discretionary,
Technology and Health Care. In contrast, investors are not positioned for an
economic upturn with underweights in the late cyclical sectors – Energy, Industrials,
and Materials. Within Financials, investors continue to reduce exposure to China
Financials, remain significantly underweight Australia Financials, but remain more
overweight India Financials than any other country-sector in the region.
Potential stock moves
One way to use this positioning analysis is to identify stocks which investors are
underweight where there may be a reason for their underweight to soon close.
Therefore, it’s worth noting this month that our fundamental analysts at BofAML
currently have Buy ratings on 8 of the 10 stocks which screen as the most
significant underweights in the region including HK Exchange, NAB, Westpac, CBA,
China Mobile HK, Tencent, China Construction Bank – H, and ICBC – H.
Investors are reducing exposure to India and China