Posted inEquitiesFRENELUX

Belgian fund selectors make renewed case for EU

An overwhelming 75% of interviewees, who were obviously unaware of the imminent next episode in the Greek drama which has continued to send markets down for the past week, said they want to increase their allocation to European equities. Contrastingly, only 8% plan to cut exposure.

Bounce-back

This is a remarkable bounce-back from September, when appetite had decreased markedly. Back in September, fund selectors said they were unsure of the directions the markets were going to take. While October’s market correction was a sign for asset management companies to downgrade their expectations for European equities, Belgian fund selectors clearly see it as a buying opportunity supported by accommodative ECB policy action.

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US equities: too expensive  

US equity sentiment has moved in exactly the opposite direction. It wasn’t particularly bullish a few months ago, but buyers and sellers were at least balancing each other out. This time around, only 8% of interviewees said they will increase allocation to the asset class. In contrast, and despite rocketing economic growth across the Atlantic, an overwhelming 42% said they would rather cut exposure. This is the second highest share of bears ever recorded in Europe for the asset class.

Already a year ago, fund selectors told our researchers they felt many US-listed companies were overvalued. Since then, the S&P 500 has gained another 29% in Euro terms. One fund selector said the only reason to own US stocks at the moment is the exposure it gives you to the dollar. But he expressed a preference to ‘reversely hedge’ his European exposure to the dollar rather than actually own any American securities.

Though Belgian fund selectors share a strong belief that European equity markets will find their way up again, they are unlikely to increase their exposure through ETFs. Just 8% plan to increase allocation to index trackers, while a third even prefers to ignore them. 

Part of the Bonhill Group.