Japanese stocks are the most undervalued in the world, according to fund managers surveyed by Bank of America Merrill Lynch.
The survey of 209 fund manager -- who manage a total of $539 billion -- found that over the past two months Japanese stocks became more popular than those in the euro zone.
As risk appetite increased over the last couple of months, investors have been looking for laggards, and "Japan screams: you have to buy me," Gary Baker, co-head of international investment strategy at Bank of America-Merrill Lynch Global Research, told CNBC Tuesday.
About 20 percent of managers surveyed would prefer to be "overweight" Japanese stocks, with 10 percent opting for Europe, Baker said.
The survey also found that fewer investors are protecting themselves against a fall in stocks. A net 55 percent have no protection against a fall in the next three months, compared with a net 48 percent in December.
- Watch the video above to see the full interview with Gary Baker.
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