Bank of America analysts report a notable shift in global equity exposure, with long-only funds increasing their holdings in Asia and Japan while reducing exposure in the US and Europe.
Specifically, in June, active equity exposure in Asia Pacific excluding Japan and Japan both saw increases of $2.8 billion. Conversely, the US experienced a reduction of $6.5 billion, and Europe saw a decline of $4.3 billion.
The investment bank said that by sector, funds notably added $11.8 billion in Communication Services and $10.6 billion in Health Care. However, they added that active exposure in the Technology sector fell sharply by $20.9 billion, with the Energy sector also seeing a significant reduction of $14.7 billion.
“Global funds are overweight the Tech heavyweights in Asia, so the strong performance of Tech in June enlarged funds’ active overweights,” said BofA.
This shift comes as non-US regions tend to outperform when the Global Wave is rising, and globally, long-only funds remain underweight in Asia, Emerging Markets, and Japan, which could amplify the impact of this rotation.
The recent tech rally impacted portfolios differently across regions. While global funds are overweight in Asian tech heavyweights, leading to increased overweights due to strong tech performance in June, they remain underweight in US tech giants like NVIDIA (NASDAQ:) and Apple (NASDAQ:).
“Global funds are underweight the Tech heavyweights in the US (NVIDIA, Apple) because they are restricted from owning, or chose not to own, so much of any one stock in a portfolio,” explained the investment bank. “Therefore, funds’ US Tech underweight increased as US Tech rallied last month.”
Globally, the most widely held stocks among long-only funds are TSMC (94%), Microsoft (NASDAQ:) (87%), Samsung Electronics (KS:) (84%), MercadoLibre (NASDAQ:) (82%), HDFC Bank (81%), Amazon (NASDAQ:) (77%), and Sony (NYSE:) (76%).
