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market insight Belgian fund selectors

The Belgians are indeed posing as the perfect model-Europeans, as their investment sentiment shiftsalt=''

mirror those of the wider European fund selector community. Trends such as a cooling appetite for European equities and high yield bonds, and a rebound of emerging markets equity sentiment, are even way stronger than in most other countries in Europe. Belgium’s fund buyers also fit perfectly in the trend of consistently stronger macroeconomic sentiment on the continent. Some 84% of them now have a positive view on the economy, a number only rivalled by their Danish peers.

Emerging markets equities

Unrivalled sentiment bounce-back

alt=''According to the latest Expert Investor Europe data, some 60% of Belgian fund buyers will increase their allocation to emerging markets stocks over the next 12 months, compared to only 7% in February. Just 5% plan to scale down their exposure, while all of the interviewed fund selectors currently use the asset class. Sentiment towards EM stocks is now close to the all-time high recorded in January 2013, when three quarters of the country’s fund buyers were poised to increase exposure, and is well above European average. Local fund selectors told our researcher that they now see emerging markets equities as attractively valued versus developed markets equities. One of them explicitly mentioned markets have not so far appreciated the improved competitiveness of exporting companies based in emerging markets on the back of 

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currency depreciation. Asian equities have also seen interest increasing significantly, but not by the same margin as emerging markets stocks.true

Western stocks

Doubts set in
The bullish sentiment towards emerging markets stocks contrasts starkly with decreased appetite for all other equity categories. The number of fund selectors increasing exposure to European equities decreased sharply to only 30%, the lowest level since records began in January 2012. Moreover, Belgian appetite for European stocks was the highest in Europe back in January. Now it has the lowest number of buyers after Norway. Most of previous bulls are now keeping their allocation to the asset class unchanged, with their number having tripled to 65% compared to January. This number might well signal increased uncertainty about the direction markets are taking.

US equity sentiment has gone pretty much the same way as appetite for European stocks, though the latter still have an edge over American equities. The number of interviewees saying they will increase allocation to US stocks over the next 12 months decreased from 50% to 20%, with most of the previous bulls indeed now choosing to hold to their positions. While sentiment is not outright negative, it is indeed the lowest since records began in 2012.

While European and US equities are markedly less in favour than before, they still have significant numbers of buyers in the Belgian market. This has never been the case for Japanese equities really, but current sentiment on the asset class is the lowest it has ever been. The majority of fund selectors we spoke to are either selling the asset class or are currently not using it. Only one fund selector said he will buy more Japanese equities.

Emerging market debt

The least disliked bonds

While it is not uncommon for investors to start a renewed engagement with emerging markets by stepping up their investments in emerging market debt, this is not the case for the Belgian fund selector community. More than four in ten of Belgium’s fund buyers are not even invested in EM corporate debt, while net sellers and non-users combined outnumber buyers for EM government debt as well. But if Belgian fund selectors were to increase their allocation to fixed income, they would likely do so using emerging market debt funds. Compared to January, appetite for all bond categories has decreased.  Developed market bond holdings will be mostly kept stable, presumably because fund selectors have reached their minimum allocation and can’t decrease further.

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High yield bonds

In selling mode

One of the more striking trends on the Belgian market is the lost appetite for high yield bonds. Fund selector sentiment regarding the asset class has even completely reversed, turning high yield from best into least loved fixed income category. Enthusiasm for the asset class decreased in an even more dramatic manner than during the same period a year ago, when it dipped from 22% buyers to 8%, following a period of increasing prices for high yield bonds. Belgian fund selectors now seem to believe high yield is too expensive, with 45% reducing exposure to the asset class, and only 5% still stepping up. In January, a healthy 29% of fund selectors were planning to increase their exposure to the asset class, with only 14% decreasing allocation. 

 

 

Part of the Bonhill Group.