While confidence in developed markets has improved over the past year, the reverse is true in emerging markets, where investor confidence has fallen following recent volatility, according to latest investor confidence survey from the Association of Investment Companies.

While confidence in developed markets has improved over the past year, the reverse is true in emerging markets, where investor confidence has fallen following recent volatility, according to the latest investor confidence survey from the Association of Investment Companies.

The research revealed that confidence in emerging markets has gone from being the most favoured to one of the least favoured sectors in the space of 12 months, with the Asia Pacific sector suffering a similar fate. In contrast, developed markets performed strongly and are back in vogue.

The research was conducted on behalf of the AIC by Morningstar.co.uk amongst 958 private high net worth investors from 6 January to 3 February 2014.

Last year's research found that 23 per cent of investors favoured the emerging markets sector. However, this has now fallen to 9 per cent, whilst Asia Pacific suffered a similar reversal in sentiment. Last year, 19 per cent of investors favoured Asia Pacific, making it the second most popular sector, but this has now fallen dramatically to just 6.5 per cent.

In contrast, the UK is in demand after a strong year for developed markets. Over a third (35 per cent) of investors favoured the UK market, compared to 15 per cent last year, making it the most popular sector. This is followed by Europe (16 per cent) and North America (10 per cent).

The survey also found that 56 per cent of investors plan to increase their stock market exposure over the next few months, compared to 55 per cent last year. 

“Investor confidence remains strong, with sentiment towards developed markets surging ahead of emerging markets. The change in attitude towards the regions underlines the huge influence of short-term performance on confidence," said a spokesperson for AIC.

Emerging markets have had a torrid time of late. Following the US Federal Reserve's decision in December to reduce the amount of money it prints in the tapering of its quantitative easing programme, investors have fled emerging markets en masse. China's decision to rein in leverage and give market forces a more decisive role in allocating resources, along with fears about its growth and improving prospects for developed economies, have also contributed to many investors exiting the sector.

The survey also revealed that amongst those planning to increase their stockmarket exposure, 34 per cent are doing so because they are feeling optimistic about the outlook for the stockmarket, whereas 23 per cent are investing due to poor rates of interest on savings accounts. Meanwhile, 33 per cent of investors plan to make no changes to their portfolio, whilst 7 per cent plan to decrease their stockmarket investments.