Fund managers with general underweights to the commodity sector also hit levels not seen for around 20 months. An anti-commodities stance was also evident with moves out of energy and material stocks while defensive weightings were increased, the bank said.
Similarly, the rally in the US dollar, concerns on the timing of a US Federal Reserve interest rate rise and China growth and currency worries have pushed managers to cut their exposure to emerging market equities, also to a fresh record low.
BofA ML polled 202 fund managers at the start of August with a total of USD 574 billion of assets under management.
"In terms of long-term investment in China, investors should not make the mistake of assuming there is some cohesive plan in Beijing - there is not. The question is whether to take official comments at face value," said managing partner of Cerno Capital, James Spence.
"The Peoples Bank of China (PBoC) has been somewhat trapped by its own logic. By referencing offshore rates they have made three weaker fixes in the world before changing their minds on the third day," he said.
China's benchmark Shanghai Composite index closed down 6.1 percent, at its lowest level since August 7 on Tuesday. Among China's other indexes, the blue-chip CSI300 and the smaller Shenzhen Composite plummeted 6.2 and 6.6 percent, respectively. This latest slide in Chinese stocks sparked fears that the PBoC could devalue its currency against the US dollar further.
Around a third of the investors surveyed by the bank were underweight EM stocks, more than during the China debt scare in March of last year and up from levels seen during collapse of Lehman brothers in 2008. At the same time, some two out of three asset managers reckon a Chinese recession is the number one "tail risk" to global markets.
"Investors are sending a clear message that they are positioned for lower growth in China and emerging markets," said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.
"European stocks remain in favor – but investors like domestically focused names and are avoiding anything exposed to China or commodities," the group said.
But not all fund managers are actively shunning emerging markets, with Jean Medecin, a member of investment committee at Carmignac, France's largest independent asset manager by funds under management, describing the current investment climate as a "stock-pickers market".
"I think it is usually when you have a point of maximum fear that you have got the greatest opportunities, so the Chinese market is so large and so deep that you can't just make an argument out of a few market movements and out of a few stocks," he told CNBC.
"One of the stocks we like in particular, which is a white goods manufacturer Midea, a competitor to Electrolux or Whirlpool, and is trading on less than 12 times for more than 20 percent earnings growth. And it is actually one of the few companies that is benefitting from the weaker renminbi. So there is no such thing as being black and white with the Chinese stock market. I think it is much more like now a stock picker market and to a certain extent it is a great thing for investment managers," he added.