As fears over the US fiscal cliff ease, more investors have turned upbeat on the global economy in the year ahead.
A Bank of America Merrill Lynch fund manager survey for December found that a net 40 per cent of investors believe the global economy will strengthen in 2013, up six percentage points from November and double October's reading two months ago.
The survey shows that the number of investors who see the US fiscal cliff - a combination of tax hikes and spending cuts set to take effect in January 2013 - as the biggest tail risk has fallen to 47 per cent, down from 54 per cent in November.
There have been signs of progress on averting the fiscal cliff in ongoing talks, as US President Barack Obama and Republican House Speaker John Boehner make concessions and appear to be moving closer to a comprehensive debt deal.
Nevertheless, the fiscal cliff remains the top worry for those polled for the survey.
Elsewhere, emerging markets have become the preferred region for investors, the survey shows.
Emerging market equity prices have jumped 16.3 per cent over the last year as risk appetite in these markets improves, thanks to decisive action from global policy makers and a re-acceleration in emerging markets growth.
A net 38 per cent of asset allocators are overweight on emerging market equities, double the level of September's survey.
Optimism on China's growth also hit the highest level recorded by this survey: a net 67 per cent of the regional survey respondents say the Chinese economy will strengthen in the coming year, up from 51 per cent in October.
"The bulls are back in China, while policy-makers elsewhere put bears onto the back foot. If the bulls are to claim a decisive victory, we need hard evidence that the economy is re-accelerating," Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, said.
Emerging market fund managers continued to add to their China exposure (net 46 per cent overweight), while Asia-Pacific investors once again raised their China allocations (net 32 per cent overweight) in December, as growth expectations for the region rise.
Of the emerging markets, investors favoured Turkey (net 69 per cent overweight) and Russia (net 54 per cent overweight) most, but notably reduced their Chile, Mexico, Korea and South Africa allocations to underweight positions.