Posted inEquitiesEuropeJapan

European equity sales bounce back

European equities were once more the best-selling equity asset class in September, according to Morningstar data, re-taking the crown they had held in four of the previous five months. Investors chipped in a net €5.8bn over the month, after sales of ETFs and active European equity funds had unexpectedly dipped to just €0.5bn in August.

Fund flows (source: Morningstar)

Investor sentiment towards the asset class has retreated somewhat from the highs reached right after Emmanuel Macron’s victory in the French presidential election. But European equities remain firmly the most popular asset class, with 45% of European fund buyers planning to increase their exposure over the next 12 months, and only 7% intending to reduce it.

Land of the rising stocks

The recovery in fund flows also comes as European stocks have found their way up again recently, after lacklustre performance in August. But the same goes for US equities, and especially for Japanese stocks, with the latter being in strong demand with European investors as well.

Japanese equity funds saw net inflows of €1.7bn in September, the most since June 2015. Investors were likely inspired by the impending re-election of prime minister Shinzo Abe last month, which was widely seen as beneficial for equity markets as it would ensure the continuation of the Abenomics programme. And investors have been reaping the fruits of their Japan bet: the Topix index is up more than 10% in euro terms since the start of September.

Investor sentiment versus Japanese equities has also shot up this autumn: according to the latest Expert Investor data, those planning to increase their allocation to Japanese equities in the next 12 months now outnumber those intending to reduce their exposure by a factor of two. When we previously gauged sentiment in early summer, the prevalent mood was to hold allocations stable.

Investors in Germany, Switzerland and especially France are by far the biggest Japan enthusiasts: half of French fund buyers plan to increase their allocation, and more than four in 10 of their Swiss and German counterparts do.

Part of the Bonhill Group.