Global investors increasingly are turning to U.S. and emergingmarket equities as Europe’s economy continues to falter.

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According to the BofA Merrill Lynch Survey of Fund Managers forNovember, investors have slightly increased their exposure toequities since October’s survey. Five percent of the panel isunderweight equities, down from 7 percent a month ago, and thenumber of investors who are overweight in U.S. equities rosesharply to 20 percent from 6 percent in October.

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Global emerging markets bounced back after a weak October.Twenty-seven percent of investors are overweight the region, upfrom 9 percent last month. The Eurozone remains the least popularregion, but the number of investors underweight Eurozone equitiesticked down just 1 percentage point to 30 percent.

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“Investors are showing belief in emerging market growth and U.S.resilience, which is key to retaining positive global sentiment,”said Michael Hartnett, chief global equities strategist at BofAMerrill Lynch Research. Gary Baker, head of European equitiesstrategy at BofA Merrill Lynch Research, added, “European growthconcerns are more intense but sentiment looks to be close to rockbottom – unless Europe’s problems spread to the rest of theworld.”

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Seventy-two percent of European respondents to the survey saidthey believe Europe will experience recession in the coming year,up from 37 percent in October. Fears of a global recession haveeased. Thirty-one percent of investors surveyed felt the worldeconomy would dodge a recession in the next 12 months, up from 25percent last month.

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For the first time, the survey asked global investors what theyforesee for China’s economy. Seventy-eight percent said they expectChina’s economy to grow by more than 7 percent during the year.Only 25 percent of those surveyed thought China’s economy wouldweaken in the coming year, down from 47 percent in October.

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Investors’ belief in emerging markets is reflected in increasedallocations to commodities and commodity-related equities. Globalasset allocators have moved from underweight commodities in Octoberto neutral this month. The biggest positive swings in equityallocations were in energy and materials. One percent of allocatorsare underweight materials, down from 9 percent in October. Theproportion of allocators overweight energy stocks stands at 20percent, up from 11 percent a month ago.

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Emerging markets and the U.S. are the regions that investorsfeel most positively about. A net 28 percent say they would like tooverweight emerging market equities more than any other region,while a net 18 percent opt for the U.S. A net 29 percent would mostwant to underweight the eurozone.

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