LONDON Nov 12 (Reuters) - Investors have grown more pessimistic on bonds, pushing their fixed income holdings to the lowest since 2006, but caution over the global growth outlook means fund managers have kept cash levels relatively high too, a survey showed on Tuesday.
The monthly survey by Bank of America Merrill Lynch also showed investors saw the dollar as being the cheapest since June 2008, which is discouraging them from buying emerging equities.
The report, which polled 174 participants who manage combined assets of $444 billion, showed a net 69 percent of investors are underweight bonds this month, matching the previous record low set in April 2006. This reading shows the difference between overweights and underweights.
A net 52 percent of investors are overweight equities in November, up from 49 percent. But the number of investors saying equities are expensive hit its highest level since January 2002.
"Investors are optimistic but they are not exuberant. Investors want to be involved in stocks but they are not fully invested," said Manish Kabra, European investment strategist at BofA Merrill Lynch.
"There's an investor mistrust in valuation and growth arguments."
Those who wanted to avoid bonds and equities parked their funds in cash, pushing cash balances to a relatively high 4.6 percent from 4.4 percent last month.
The possibility of the Chinese economy making a hard landing and of a collapse in commodity prices have come back as the biggest tail risks for investors.
Allocations to China fell sharply to a net 11 percent overweight from a net 56 percent overweight in October.
Concerns over China and the view on the U.S. dollar kept investors away from emerging equities. Only 3 percent of investors think emerging stocks will match or exceed their 16 percent annualised return of the past decade.
Korea grabbed the bulk of outflows from China, with investors becoming a net 56 percent overweight from a net 22 percent overweight in last month.
The poll was conducted from Nov 1 to Nov 7. (Editing by Hugh Lawson)