After the rally in Canadian stocks this summer, investment managers are less bullish about domestic securities, says the latest Russell Canadian Investment Manager Outlook.

Instead, they’re looking beyond our borders and finding global markets increasingly attractive. The vast majority of those surveyed now say Canada’s stock market is fairly valued, rather than underappreciated and full of opportunities.

Canadian managers are most enthusiastic about emerging markets equities, with 62% holding a favorable outlook on the asset class. The ECB’s purchase of sovereign bonds to stave off a financial crisis in Europe has improved sentiment towards the Eurozone as well.

Read: Economic lessons from emerging markets

“ECB policy action has reduced the number of bears on Europe,” said Greg Nott, CIO of Russell Investments Canada. He says most managers no longer had a negative outlook on the region, but they are still somewhat wary.

“The risk of the Eurozone falling apart has been substantially reduced. But is it clear sailing from now on? Certainly not.”

Read: Bet on emerging markets: expert

Still, 57% of those surveyed say developments in the Eurozone debt crisis will be a positive for active managers over the next year. Only 29% say such developments will be negative.

They’re also split over China’s slower economic growth; while 43% see China’s economic situation as encouraging, about a third (29%) believe it’ll continue to decelerate.

Read: Don’t bet on a China slowdown

The so-called U.S. “fiscal cliff” was seen as the biggest challenge facing managers and investors over the next year, the survey revealed. Unless congress takes action, it could lead to $600 billion in spending cuts and tax increases starting in 2013.

Gustavo Galindo, emerging markets portfolio manager for Russell Investments, says the additional monetary stimulus from the ECB and the U.S. Federal Reserve—which launched its QE3 program in early September—has encouraged investors to move back into riskier asset classes.

Read: Equities will benefit from QE3

Although a majority of managers surveyed (54%) remained bullish on Canadian equities, this number is down from 70% in Q2 2012. The S&P/TSX Composite Index has gained 4.6% since the last survey, and has now reached fair market value in their opinions.

While only 13% believed the Canadian stock market was fairly valued in Q2, for example, more than 70% now characterize it as reasonably valued.

They’ve also become less optimistic about the Canadian dollar, which appreciated 4.8% against the U.S. currency in 2012 and is currently above parity. “There aren’t a lot of Canadian-dollar bulls left after the run-up we’ve seen in the past few months,” Nott says.

In contrast, interest in Canadian fixed-income securities has increased. The attention paid to Canadian bonds increased 16%, up from 20% to 36%.

And while the negative view on Canadian fixed-income issues continues to dominate, the case of high-yield bonds has improved. Optimism went from 11% to 43%, which reflects investors’ search for yield, says Nott. Issuance has also increased over the past year.

Read: Fixed-income opportunities for clients and How safe is your yield?

In terms of sector views, managers remain upbeat about energy stocks. This confidence also extends to the information technology, financial services, industrials, consumer discretionary and materials stocks sectors. Sentiment was little changed for all when compared to Q2 2012 results.