Financial Associated Press, October 17 news (Editor Huang Junzhi) Bank of America pointed out in the latest global fund manager monthly survey that after China, the largest economy in Asia, introduced a package of economic stimulus measures, many investors have turned bullish on the Chinese economy and stocks.

However, the survey results show that at the same time, the global stock market has seen a sell signal for the first time since February 2021.

It is reported that from October 4th to 10th, Bank of America surveyed fund managers from 195 asset management companies worldwide, with total assets under management totaling $503 billion.

The Chinese "explosive popularity".

After the introduction of stimulus measures in China, "being long Chinese stocks" ranked among the top 3 hottest trades in Bank of America's latest survey, reaching a proportion as high as 14%, second only to the top 1 "being long magnificent 7" (43%) and the top 2 "being long gold" (17%).

At the same time, the net proportion of global fund managers expecting a stronger Chinese economy in the next 12 months reached 48%, the highest level since April 2023.

Bank of America wrote in the report: "After the policy shift, growth expectations for China have rekindled. Participants believe this time is different, so they are abandoning opportunities elsewhere and turning their focus to China."

Edelweiss Asset Management, President and Chief Investment Officer of Stocks, Trideep Bhattacharya, said: "In terms of valuation, the Chinese market has become quite attractive, coupled with expectations for stimulus plans, attracting capital."

Bank of America's survey also showed that investors are beginning to refocus on China, at the cost of reducing their exposure to the Indian stock market. By the end of the survey, foreign investors had withdrawn nearly $8 billion from the Indian stock market in October, marking the largest outflow of funds since the peak of the panic in March 2020.

Furthermore, according to this survey, under China's stimulus policies, emerging market stocks and commodities are seen as the biggest winners, while government bonds and the Japanese stock market are considered the biggest losers.

Sell signal lights up.

Contrastingly, in the global stock market, the Bank of America report "a red light is flashing." The report states that this is the first time a sell signal has appeared in the global stock market since February 2021.

The survey also shows that cash allocation has decreased from 4.2% to 3.9%, the lowest level since February 2021.

Bank of America explains that a cash allocation ratio below 4% is a sell signal. "This is a contrarian signal, as it typically occurs when investors massively invest in the stock market with low cash levels. Sell signals usually indicate a weak short-term return."

Bank of America strategist Michael Hartnett said: "Since 2011, there have been 11 instances of such 'sell' signals, with global stock returns of -2.5% in the month following the signal trigger, and -0.8% in the 3 months following the 'sell' signal."

However, this warning comes at a time when the stock market is approaching historic highs. Hartnett pointed out that due to the Fed rate cut, China's stimulus measures, and But after the bursting of the internet bubble and the Fed's rate cut in 2001, the ROI dropped by more than 10%.expectations, investors are exhibiting very optimistic behavior. Investor optimism has seen its largest increase since June 2020, which is causing the bubble to rise.

As for potential market risks, investors are most concerned about geopolitical conflicts, with the percentage rising from 19% last month to 33%. Other risks that investors are watching include rising inflation and the potential for an economic recession.

Editor/ping