Fund managers' allocations to euro zone equities have hit pre-crisis levels, amid a rapid shift in sentiment towards the region, according to a survey by Bank of America (BofA) Merrill Lynch.
The bank's fund manager survey for September revealed that investors' bullishness towards Europe had offset a continuing sell-off of emerging markets, which have been slammed by uncertainty over the tapering of the U.S. Federal Reserves' stimulus program.
According to the report, published on Tuesday, allocations to euro zone stocks reached their highest level in September since May 2007. Some 36 percent of global asset allocators were overweight Europe — more than twice August's 17 percent.
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Fund managers were bullish on Britain in particular, given the string of positive data to come out of the country over the last month. In an all-time high for the survey, 12 percent of allocators were overweight on U.K. stocks.
BofA Merrill Lynch stressed that the switch in sentiment towards Europe has been swift. The bank's European investment strategist, John Bilton, described investors' belief in Europe's economy as "robust".
Data released on Tuesday showed better-than-expected rises in euro zone business sentiment, the latest in a series of positive economic indicators since continental Europe emerged from its longest recession in over 40 years.
(Read more: Europe's real dilemma: Demand)
Bilton stressed that despite euro zone equities' strong comeback in September, "value remains the best on offer in developed world markets".
Emerging markets provided the best value for investors in almost a decade in September, the survey found, with 36 percent of respondents saying stocks from these countries were the cheapest in the world.
(Read more: Emerging market rout? That was so 3 weeks ago)
Nonetheless, sentiment towards emerging markets remained negative.
"Even though fears of a China hard-landing have largely been allayed, investors remain staunchly bearish on emerging market equities," Michael Hartnett, chief investment strategist at BofA Merrill Lynch, said.
Some 18 percent of investors were underweight emerging markets, among the lowest exposure since November 2001.
The survey, of 236 people with $689 billion of assets under management, also found that the "great rotation" from bonds to equities had continued in September.
Investors have been turning their backs on bonds, generally considered "safe haven" assets, amid indications of economic recovery in both the U.S. and Europe, and growing expectations of Fed tapering. The Federal Open Market Committee's monthly meeting kicked off on Tuesday, and most economists expect the central bank to confirm a scaling back of its $85 billion-per-month bond-buying program on Wednesday.
The gap between allocations towards stocks and bonds was at its widest since February 2011, according to BofA Merrill Lynch.
"Bond market fear is greater than equity market greed," Hartnett said. "Assets tied to China (e.g. emerging markets, commodities) and the era of zero rates (e.g. bonds, defensives) are very much out of vogue."
—By CNBC's Katrina Bishop. Follow her on Twitter @KatrinaBishop