Global investors should gear for a “massive policy shift” to fiscal stimulus next year, according to the survey.

As investors worldwide push back their expectations of a rate hike from the US Federal Reserve, pessimism over China seems to be fading, according to the BofA Merrill Lynch Fund Manager Survey for October.

Amid sluggish growth in the global economy, less than half (47 per cent) of investors now expect the Fed to raise rates this year, compared to 58 per cent in September.

“As investors debate the timing of a rate hike, they should be anticipating a massive policy shift in the US, Europe and Japan from QE to fiscal stimulus in 2016,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

The threat of recession in China appeared to simmer this month as the number of panellists identifying China as the greatest “tail risk” fell from 54 per cent in September to 39 per cent this month. Meanwhile, short emerging market equities was named the most crowded trade in October by 23 per cent of the panel, up from 20 per cent.

The survey, which was conducted on 209 panellists with $512 billion of assets under management, also revealed a gloomy corporate outlook, with over a quarter of investors predicting corporate operating margins will decrease in the coming year, up from a net 18 per cent.

In other findings, cash holdings worldwide dipped to 5.1 per cent of portfolios, down from 5.5 per cent last month, which was the highest level since 2008's collapse of Lehman Brothers.