LONDON- Investors turned more bullish on beaten down pockets of equity sectors and commodities, gearing up for the "reopening trade" as COVID-19 vaccines were being rolled out, BofA's monthly investor survey showed on Tuesday.

The euphoria sent investors' cash holdings down to 4% in December - to pre-COVID-19 levels - according to the survey of 217 fund managers with $576 billion in assets under management.

The drop triggered a contrarian "sell signal", BofA added. Global stock valuations are nearing the highs seen during the dotcom bubble, with the MSCI World index trading close to 20 times forward earnings.

A whopping 60% of the investors surveyed by BofA said they expected emerging markets to outperform in 2021 by a big margin amid a falling dollar, vaccine rollouts and rising expectations of a V-shaped economic recovery. Allocation to emerging market stocks hit the highest since November 2010.

"2020 was a year utterly dominated by COVID-19 which caused the quickest economic and financial market collapse of all time. However, just half a year later, recovery expectations have also surpassed prior recessions in both speed and magnitude," BofA wrote in a note.

COVID-19 was still seen as a threat with 30% of the investors in the survey citing it as a top tail risk, though lower than the 41% seen in November. Fears of inflation featured as the second top tail risk.

Long U.S. tech remained the "most crowded trade" for the eighth straight month. Short dollar and long bitcoin came second and third.

Bitcoin has gained 170% this year as hedge funds, family offices and even old-school insurers stormed into the cryptocurrency this year. Some Wall Street banks also began talking up its role in portfolios.

(Reporting by Thyagaraju Adinarayan; Editing by Karin Strohecker and Alex Richardson) ((thyagaraju.adinarayan@tr.com; +44 20 7542 7015; Reuters Messaging: thyagaraju.adinarayan.thomsonreuters.com@reuters.net; Twitter @thyagu))