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Investing.com-- Investor sentiment across Asia has taken a sharp turn for the worse, with fund managers anticipating a significant economic slowdown in both regional and global markets, Bank of America (BofA) said in its April Asia Fund Manager Survey.
The survey, conducted between April 4 and 10, found that a net 89% of respondents expect weaker Asian economic growth, with 82% anticipating a broader global slowdown. This marked the second consecutive month of steep declines in expectations and the most pessimistic readings since the COVID-19 pandemic.
Profit expectations have also collapsed, with a net 78% of fund managers forecasting a worsening Asian profit cycle and most viewing current consensus earnings as too optimistic, according to BofA.
As a result, return expectations have turned negative for the first time since October 2022, with no perceived valuation support, BofA analysts said.
Investor sentiment on China reversed sharply after signs of recovery last month, analysts said.
A net 58% of survey respondents now expect the Chinese economy to weaken over the next 12 months, despite expectations of monetary easing. BofA noted structural bearishness has reached survey highs, as households remain in capital preservation mode.
Japan has also seen sentiment sour as a net 26% of respondents expect economic weakening, with return expectations and optimism around market direction hitting record lows, BofA said.
Investors are focused on foreign exchange trends, Bank of Japan policy, and corporate reform signals, analysts said.
Japan remains the most favored market, followed by India, which regained its second-place position after six months. China and Thailand are now the least preferred, BofA analysts wrote.
Sector allocations reveal a strong tilt toward defensives in Asia ex-Japan, with consumer staples and utilities leading, according to BofA.
Semiconductor sentiment has plunged, with 59% predicting a downturn. In Japan, banks and utilities top preferences, while in India, infrastructure and consumption remain key themes, analysts added.
The survey was conducted from April 4–10, before former President Trump’s 90-day tariff pause announcement, which may have skewed results, BofA said.