LONDON—Investors in Europe have been plowing money into global stock funds in recent months, a sign of an uptick in confidence after it was severely shaken in the first weeks of the coronavirus pandemic.
Global equity funds offered by European asset managers in August took in €8.6 billion, equivalent to $10 billion, and were the bestselling sector in the European fund industry, which includes mutual funds and exchange-traded funds, according to data released this week by Refinitiv Lipper. Such funds attracted €8.5 billion in July and €12.1 billion in June. That is up from net outflows of €8.1 billion in March.
The renewed push into stocks signals confidence in government stimulus packages passed to bolster economic growth in the wake of the coronavirus as well as improved investor sentiment due to many markets recovering quickly after March’s selloff, participants said.
European sanguinity might be punctured soon, however. Equity markets sold off this week as investors grow jittery about new outbreaks of Covid-19. And additional risks still abound, such as the coming U.S. election and fallout from Brexit, which are fueling uncertainty, said Detlef Glow, Refinitiv Lipper’s head of EMEA research.
Still, some believe there is room to run. Jack Turner, an investment manager at U.K.-based Seven Investment Management, which advises on £14.4 billion, equivalent to $18.3 billion, in assets, said his team topped up its equities allocation two weeks ago. “We have a relatively constructive view on the economic outlook, which goes back to the substantial amount of stimulus that we’ve seen, many times larger than after the global financial crisis,” he said.
While there are fears of further waves of Covid-19, “each day we get closer to better treatments and potentially a vaccine down the line,” Mr. Turner said, leading his team to believe that, combined with ongoing stimulus, there is good potential for global equities to go up.
Global stock markets that are up this year include the Nasdaq Composite Index and Shanghai Composite Index, according to FactSet.
Emma Walls, head of investment analysis for U.K.-based
PLC, said markets “have begun to accept the new normal” and individual investors are piling into U.S. stocks, developed market equities and investments that have a growth or tech bias.
A survey that Hargreaves Lansdown conducted between Sept. 1 and Sept. 8 found a 13-point jump in the confidence levels of respondents of their likelihood to invest in global stock markets from the month prior.
Not all investors are still buying heavily into the tech theme. European investors poured money into tech and health-care ETFs in the second quarter, but have been allocating less to tech recently, said Nusrath Hussain, senior ETF product specialist at index-tracking giant Vanguard Group. Investors are instead putting money in broader U.S. stock benchmarks and global equities including European companies. Ms. Hussain said the bestselling product for the firm in Europe this year has been a global equities ETF.
European investors aren’t alone in the direction of their flow: Globally, some $26 billion was dispatched into equities for the week of Sept. 16, the biggest inflows to global stocks since March 2018, according to research from
Bank of America Corp.
Those flows were funded by redemption from money-market funds, the bank said, low-margin funds that investors prize for their ability to easily withdraw funds. Outflows from money-market funds can signal investors’ eagerness to ratchet up their risk appetite, though corporations also use them to park cash. European money-market funds recorded €13 billion in outflows in August, the first month they have had net outflows since March, according to
Morningstar Inc.
Refinitiv Lipper said there might be a “shift toward riskier asset classes” as those inflows were nearly as high as the outflows from money-market products it tracked.
Write to Julie Steinberg at [email protected]
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
