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By Natsuko Waki
LONDON, March 18 (Reuters) - Investors cut equity allocations to a 15-month low and kept their cash levels high in March as tensions in Russia and Ukraine cut risk appetite, a survey showed on Tuesday.
A monthly fund managers survey by Bank of America Merrill Lynch showed investors' equity holdings fell to a net 36 percent overweight in March from a net 45 percent overweight last month.
The net reading shows the difference between overweight and underweight positions. Allocations to bonds improved to a net 53 percent underweight from 55 percent last month.
The report, which polled 192 fund managers with combined assets of $509 billion, showed cash levels remained at 4.8 percent, the highest since July 2012.
Some 81 percent of investors said geopolitics were the biggest risk to financial market stability, up from 20 percent last month.
"Aggregated risk at a global level has come back," said John Bilton, head of European investment strategy at BofA Merrill. "It's obviously coming from Russia and Ukraine, which weighed on sentiment as well as local bond markets and the rouble."
The rouble has weakened almost 9 percent this year as slow growth and high inflation hit the oil-rich economy.
Investors remained neutral in Russia, having sharply cut their overweight positions in February. But BofA said the sample size was small.
Investors are now also worried about the impact of western sanctions after Russia said it would proceed to annex Ukraine's Crimea region.
Emerging markets remained the least favoured region with a net 31 percent of investors underweight, the record low.
The number of investors expecting the Chinese economy to weaken over the next 12 months rose to a net 47 percent, a level not seen since July 2013.
Investors said short yen and long peripheral European debt positions were the two most crowded trades.
Overall, however, a net 62 percent of investors expected a stronger global economy, up from 56 percent in February.
Supported by their expectations for strong U.S. growth, investors boosted allocation to U.S. stocks to a seven-month high of 13 percent overweight on a net basis.
In contrast, a net 16 percent of investors are overweight Japan, a 12-month low.
The number of investors who say stocks are overvalued rose to a net 12 percent, the highest since July 2000.
"They still assume the U.S. will have a strong bounce back. But they have awful a lot of cash in the balance sheet and they are not fully invested," Bilton said.