Posted inAnalysisFRENELUX

Dutch fund selectors overwhelmingly overweight Europe

Some 41% of interviewees told us they will (further) increase their allocation to European equities. This is similar to last September, but with the important difference that all fund buyers we met have increased their allocation to European equities in the meantime. So those who will decrease their allocation will do that from an overweight position, and are not necessarily bears on the asset class.

The only reason that not more Dutch fund selectors will increase their European equity allocation is that they have already done so. The main reasons for this unanimous optimism are the uptick

 

in growth in the eurozone, the low oil price and the cheap euro. The Dutch optimism for European equities, and their dislike for US stocks (see below), is a reflection of the Pan-European fund selector mood. 

Rushing for the exit

The Dutch fund selector mood about US equities is exactly at the other end of the spectrum. Interviewees are either underweight, or will decrease their exposure soon. Even though most of those not planning a decrease are already underweight, sentiment is still the most depressed ever by a long shot. Never before we have counted so few buyers and so many sellers of US equities in the Netherlands. Part of the reason for the ease by which Dutch investors are abandoning the asset class is that they have enjoyed double-digit returns during the past two years, so they are happy to take some profit.

This unprecedented consensus, selling out of US equities and buying European stocks, nevertheless prompts the question whether the optimism on Europe and the pessimism on the US is perhaps a little overdone. Still, not everyone is negative about the asset class. George Raven, chief strategist for the private bank Insinger de Beaufort in Amsterdam, believes that

 

US equity sentiment has gone too negative, and sees buying opportunities in the asset class.

“If you correct for sector weightings, US equities are not more expensive than European stocks. They are actually cheaper,” he says. “In the US, sectors such as healthcare and technology, which typically have higher valuations, are relatively well-represented. In Europe, this is the case for cheaper sectors like utilities and banks.”

Part of the Bonhill Group.