Posted inEquitiesEuropeUnited Kingdom

European equity sentiment in freefall

When Expert Investor polled fund buyers about their investment allocation intentions in June, only a third of respondents said they planned to increase their exposure to European equities in the next 12 months. While this is still a pretty high number, compared to the equivalents for US and Japanese equities for example, it is the lowest since 2011.

And the record outflows from equity funds post-Brexit, as reported by Lipper yesterday, suggest sentiment has fallen a lot deeper since data were collected. Indeed, anecdotic evidence gathered by Expert Investor suggests quite a few investors have turned either neutral or negative on European equities in recent weeks.

 

And as the saying goes, one man’s pain is another man’s gain. In this case, it’s emerging market equities that benefit from European misery. In a recurrent see-saw pattern that’s apparent for both fund flows and investor sentiment and has been exposed by Expert Investor before, global emerging market equities rise when European equities fall, and vice versa.Three months later, this number has fallen to below 10%, with the majority of Belgian fund buyers now planning to keep their exposure unchanged. Finland is the only country where net sentiment (those planning to increase exposure minus those intending to decrease it) did not decline.Already before the British EU referendum, investors in almost every European country had become less enthusiastic about the asset class compared to April, when the previous poll was conducted. Belgian investors have made the most dramatic shift: back in April, almost 80% had said they would increase their exposure.

Part of the Bonhill Group.