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© Reuters. FILE PHOTO: A man stands in front of an electronic display at B3 Brazilian Stock Exchange after an automatic circuit breaker was triggered this morning, in Sao Paulo, Brazil, March 16, 2020 REUTERS/Rahel Patrasso (Reuters) – Emerging markets investors are increasingly concerned about the outlook for economic growth in developing countries and are clinging to high cash levels with scarce plans to deploy funds in the months to come, an HSBC poll showed on Thursday.

The quarterly survey showed 60% of respondents expected economic activity in developing nations to improve over the next 12 months, down sharply from 73% in April and 89% at the turn of the year.

These views echo growing concerns over the growth trajectory for emerging economies. On Tuesday, the International Monetary Fund cut its 2021 growth forecast for emerging economies by 0.4 percentage points to 6.3%, citing slow vaccination progress while their developed peers enjoyed an upgrade.

Nonetheless, respondents expected central banks in many emerging markets to continue to raise interest rates.

“The feeling among investors is that while the growth outlook is dimmer and inflation is less of a concern than at the beginning of the year, EM countries will continue to hike rates because they are trying to pre-empt Fed tightening and avoid a repeat of the taper tantrum we saw in 2013-2014,” Murat Ulgen, global head of EM research at HSBC said.

Central banks in Brazil, Russia, Hungary and Mexico, among others, have already hiked rates this year to counter inflation pressures and currency depreciation.

Respondents cited the U.S. Federal Reserve hiking interest rates and tapering its pandemic bond purchase as the biggest risk for emerging markets, ahead of COVID or higher-than-expected inflation.

While the number of respondents holding more than 5% of their portfolio in cash decreased to 45% from 48%, investors willing to keep cash levels unchanged for the next three months stood at six out of ten, the highest in at least a year.

Investors also reduced overweight positions in fixed income assets and added to overweight positions in equities and currencies, according to the poll.

HSBC conducted the survey between June 8-July 23, asking 124 investors from 119 institutions representing $506 billion of emerging market assets under management.