By Josephine Mason and Helen Reid
LONDON (Reuters) - Fund managers have named bearish bets in European equities as the "most crowded" trade in Bank of America (NYSE:BAC) Merrill Lynch's survey for the first time in its history, suggesting sentiment for one of the world's most shunned markets may have troughed.
Investors have pulled cash from European stocks over the past year, betting the market would be weaker compared with the United States and other regions as euro zone economic growth slows and Britain's chaotic exit from the European Union raises worries about disruption to its economy.
Short European equities replaced long emerging markets, which held the title for just one month.
The shift in investor views reflects broader uncertainty about the direction of financial markets as the Federal Reserve and ECB keep interest rates on hold amid signs that growth is slowing.
It also suggests that fund managers believe the gloom that has seen $30 billion leave European equities so far this year may have been overdone.
In a note on Sunday, Morgan Stanley (NYSE:MS) chief European equity strategist said he believes Europe is set to surprise on the upside as issues that weighed on growth in the second half of last year start to fade.
A slowdown in China, the world's No. 2 economy, topped the list of biggest tail risks, ousting the trade war, which had been at the forefront of investor concerns for the previous nine months, according to the survey.
BAML's March survey - conducted between March 8 and 14, among 239 panelists managing $664 billion in total - also indicated that investor risk appetite had continued to fall, with global equity allocations remaining at September 2016 lows.