UK investors see much greater value in emerging market (EM) equities compared to the previous quarter according to recently released Valuations Index from CFA UK.
More than half of the survey’s respondents believe the asset class is either very or somewhat undervalued, an 11% increase on Q2 figures.
The survey also shows a widening gap in the valuations of emerging and developed market equities with the latter deemed to be overvalued by 65% of investors.
Elsewhere perceptions of bond overvaluation decreased overall, more so with government bonds (10%) than corporate bonds (3%), while gold was seen to be trading at fair value by close to half of respondents.
The extent to which investors see EM equities as undervalued was “surprising” said Will Goodhart, CFA UK chief executive, although he ascribed the change to recent currency sell-offs in South America, Turkey and South Africa.
However, warned Goodhart, investors’ perceptions may become more neutral in the coming months due to raising rates, a strong dollar, trade tensions in the US and the impact of the recent elections in Brazil. “Our respondents continue to see these as uncertain times,” said Goodhart.
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