Emerging market sentiment in UK turns

Global chartsInvestors in the UK increasingly view developed market equities as overvalued and emerging market equities as undervalued.

At the same time, fewer investors view traditional safe havens like government bonds and gold as overvalued.

The CFA Society of the UK says almost half of the investment professionals (49%) it surveyed for its valuations index consider developed equities as overvalued, up from 39% last quarter.

Only 16% view them as undervalued, making it the lowest proportion since the index was first published two years ago.

There has also been a shift in opinion regarding government bonds and gold in the last quarter, with fewer investment professionals viewing the traditional safe havens as overvalued.

The proportion of investment professionals viewing government bonds as overvalued fell to 71% from 76%.

Only a third (36%) now view gold as overvalued, down from 46% in the first quarter of this year. In contrast, in the first and second quarter of 2012, 61% viewed it as overvalued.

“Expectations that central banks may delay interest rate rises, given recent economic data and an increasingly benign inflation outlook, appear to be encouraging some investment professionals to reconsider the relative value of debt and equity investments,” says Will Goodhart, chief executive of CFA UK.

“With both the FTSE and S&P indices hovering around record highs, our data suggests that investors should perhaps be cautious about reaching for yield in developed market equities when investment professionals view that yield premium as vulnerable.”

The CFA Society of the UK surveyed its members between May 9 and 14, and received 532 responses from analysts and investors.

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