EUROPE - More than half of European fund managers think euro-zone equities are undervalued, according to a survey by Bank of America Merrill Lynch (BofA ML).

Further, most investors now believe Europe will not see any growth over the next 12 months, as some consider the possibility of a double-dip recession.

The figures, released today as part of the institute's June Fund Manager Survey, show Europe is perceived as the cheapest it has been in almost six years, while global equities are now seen as undervalued by 38%.

Only a net 27% of global investors are now underweight in the euro-zone, down by 7 percentage points, encouraged by the view the euro is getting close to fair value.

Less than a sixth of respondents now see the single currency as overvalued, a significant drop from last May's 45% and the best result in almost four years.

Gary Baker, head of European equities at BofA ML, said: "What that does, it starts to allow a rehabilitation of Europe as an investment region, certainly in the eyes of global investors."

However, while investors may be positive about investment in Europe, many are less so about its growth prospects over the next 12 months.

In April, 62% of respondents said the euro-zone would strengthen over the next year.

Now, only a net 7% think the region will grow at all in that time.

The research matches data released today by Germany's Centre for European Economic Research (ZEW), where only a net 19% of those questioned see growth as realistic, down by half compared with the previous month's response.

"You are verging on double-dip territory in terms of pessimism out there," Baker said.

"Similarly, profit-growth expectations have fallen to plus 17% from 72% in April - a fairly calamitous fall in terms of expectations."

The BP oil spill has also affected global investment patterns, with the energy sector now only rated overweight by 7%, dropping by 30 percentage points in one month.

On a European level, banks retained their position as least liked sector, being 49% underweight, followed closely by real estate at 47%.