Investment fund managers have turned gloomy about economic prospects in Europe and China, a Bank of America/Merrill Lynch global survey found.

Optimism over China’s economy fell at the fastest rate ever recorded in the monthly survey. Globally, only 7 percent of the managers expect China’s economy to strengthen over the next 12 months, down from 51 percent in the same survey a month earlier.

The percentage of European fund managers who expect their region to grow over the next 12 months dropped to 51 percent from 74 percent in January.

The survey of 365 managers was taken Feb. 5-11, amid concern over whether Greece would be able to meet payments on its government debt and news that in the fourth quarter of 2009, Germany‘s economy was stagnant.

On Feb. 12, China announced it is raising reserve requirements for its banks, leaving them with less money to lend in a move meant to slow growth and inflation.

Yongsheng Xu, a professor of economics at Georgia State University‘s Andrew Young School of Policy Studies, believes the fund managers are overreacting on China. China’s economy expanded by more than 10 percent in the   last quarter of 2009, he told GlobalAtlanta. Even with tightening, there will be a “reasonably high” growth rate in 2010, in part because China will still be spending funds from its 2009 stimulus package, he said. 

Fund managers are also too pessimistic about Europe and may have been overly influenced by media reports about  debt problems in Greece, said Jeffrey Rosensweig, Emory University associate professor of international business and finance who also directs the Global Perspectives Program there.

“They are projecting the problems of Greece, which has 10 million people, onto the entire European region, which has 500 million people,” he told GlobalAtlanta. “I haven’t seen Greece command so much attention since the days of Alexander the Great.” 

Europe’s economy will expand in 2010, Dr. Rosensweig said, although he thinks the growth will be moderate.

The Merrill Lynch survey also found a big jump in the percentage of fund managers who see no interest rate hikes in Europe or the U.S. in the next year.

Among European managers surveyed, 45 percent do not expect a rate hike by the European Central Bank in 2010, up from 19 percent in January. Among managers worldwide, 42 percent believe there will be no rate hike in the U.S. this year, up from 27 percent in January.

Survey participants manage a total of $852 billion.

For more on the survey, click here.