European shares 'are the most undervalued' Far more global investors think Europe is undervalued than think the opposite, making it by far the cheapest region globally, according to a survey of fund managers conducted by Bank of America Merrill Lynch. "A net 38pc of global investors think Europe is undervalued," said the survey. This means that the percentage of fund managers who think Europe undervalued exceeds the number who consider it overvalued by 38 percentage points. However, investors have yet to fully follow up their opinions with action. A net 10pc of manager are now "overweight" in European shares. "Allocation to EU equity increased in October but only up to the long run average," the survey said. Fund managers no longer see the eurozone debt crisis as the biggest risk to the markets, it added. The US "fiscal cliff" - planned tax rises and spending cuts - is the biggest risk, according to 42pc of those surveyed. The euro crisis was in second place, at 27pc, followed by the risk of an oil price shock should Israel attempt to bomb Iran's nuclear facilities (10pc). If investors were to shift to riskier assets, 37pc would sell government bonds, 19pc would rotate from defensive stocks and 33pc would cut their cash holdings, Merrill Lynch said. Investors see American shares as overvalued. "The divergence of EU and US valuations eased a touch in this month's survey, but remains at its third widest reading in history," the report found.