Investors are lowering their expectations for global economic growth this year amid low sentiment towards emerging markets, according to new research.

Global investors now fear a Chinese recession as they pull back from emerging market equities, according to the BofA Merrill Lynch Fund Manager Survey for August.

A recession in the world's second largest economy is now rated the number one “tail risk” by 52 per cent of investors surveyed. The global survey of 162 fund managers looking after $449 billion in assets was conducted last week, when China devalued its yuan currency following disappointing trade data and July's slide in equities.

August also saw an all-time high underweight of emerging markets and the lowest allocations to emerging market equities since 2001, according to the survey. The number of investors deeming it the region they most want to underweight surpassed the level reached during China's debt scare in March 2014. Meanwhile, Europe was identified as the region they most want to overweight.

“Investors are sending a clear message that they are positioned for lower growth in China and emerging markets,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research. 

“European stocks remain in favour – but investors like domestically focused names and are avoiding anything exposed to China or commodities,” said the company's head of European equity strategy, James Barty.

Correspondingly, investors seem to be scaling back their expectations for economic growth. Just over half of respondents expect the global economy to strengthen in the coming year, down from 61 per cent in July.