Investors’ risk appetite rose in October and they favoured emerging market equities as the asset class of choice due to expectations that central banks will continue to pump money into the system, according to the latest monthly Bank of America Merrill Lynch survey of fund managers.

The level of risk that investors are taking in their portfolios rose more sharply than in any month since April 2009. The proportion of asset allocators overweight equities nearly tripled to a net 27 per cent from a net 10 per cent in September, while they became more bearish on bonds. The proportion of portfolio managers who were overweight cash fell to a net 6 per cent from a net 18 per cent in September.

Most of the increased exposure to stocks applied to the global emerging market category, according to the survey, which was carried out from 8 October to 14 October.

A total of 194 fund managers, managing a total of $492 billion, took part in the survey.

Appetite for US, eurozone and Japanese equities remained stable while the panel became less bearish about the UK. 

Portfolio managers are more optimistic about China’s growth over the coming year. A net 19 per cent expects China’s economy to strengthen in the next 12 months, up from a net 11 per cent in September and 38 percentage points above August’s level.

Asset allocators shifted from their defensive sector positions of September back towards cyclical and growth stocks. A net 25 per cent of the panel is underweight utilities, up from 11 per cent a month earlier. The biggest gains were in industrials, materials and technology, all suggestive of greater optimism on economic growth.

In other details, a net 45 per cent of fund managers now regard the US dollar as undervalued, compared with a net 18 per cent taking that view in September.

Gold, propelled to new highs by its safe-haven status, is viewed as overvalued by a net 24 per cent of the panel, double the level of two months ago. (The yellow metal currently trades around $1,360 an ounce.)