Equities are, rather unsurprisingly, considerably more in fashion. Appetite for most equity categories has remained quite stable, and so has the Danes’ macroeconomic outlook. Danish fund selectors continue to see almost exclusively bright macroeconomic prospects and, together with their Belgian counterparts, have the most positive outlook in Europe.
Enthusiasm about high yield bonds has vanished quickly. From February till June, the number of buyers of the asset class has gone down in a straight line. At the time of our research trip to Copenhagen in February, 40% of our Danish readers said they would increase their exposure to high yield bonds. In April at the Expert Investor Denmark symposium that number was down to 26%, and our freshest data gathered this summer put it at a record low of just 5%. As high yield bonds have traded in quite a flat line this year, there is no massive sell-off planned as of yet though. Roughly two thirds of interviewees will keep their allocation stable over the next 12 months, while a quarter are going to decrease exposure.
Emerging market debt
Renewed enthusiasm sustained
Denmark’s fund selectors seem to have switched their attention from high yield to emerging market debt. After a dip in sentiment in February, when only one in five fund selectors were buying emerging markets government bonds, emerging market debt sentiment is again firmly back into positive territory. Fund selectors told our researcher in February they were waiting for new entry opportunities into emerging market debt, something they now seem to have found. Appetite for emerging markets government bonds hasn’t even been this high for two years, with 35% of Danish fund selectors planning to increase their exposure and 45% holding to their positions.
Developed market bonds
Europe’s least bearish
Noting that Denmark has a relatively strong focus on bond investments, it is perhaps not surprising that sentiment towards developed market bonds is markedly above the European average, though it is still net negative with 35% of local fund buyers selling out of both corporate and government bonds and 10% not using the asset class. With 15% of fund selectors saying they will increase exposure, Denmark has the highest number of developed credit buyers after Sweden. Government bonds have twice as many buyers than the pan-European average with 10% of fund selectors increasing exposure.
Emerging markets equities
Joining the flow
The Danes join in with the strong, pan-European rebound of emerging markets equity sentiment. Just like in all other Nordic countries, the asset class is now the most popular of all. Half of Denmark’s fund selectors now say they will step up allocation, the same number as the Pan-European average, while another 45% plan to keep their exposure untouched. The sentiment change has not been as dramatic as in other European countries, as emerging markets stocks tend to be popular with Nordic fund buyers, the Danes included. Emerging markets equity sentiment has never been net negative in Denmark since records began back in 2009.
Danish fund selectors seem ambiguous about US stocks, with two thirds of interviewees keeping their allocation stable. That’s the highest level in four years, and more than twice as high as in April. Quite striking though is that the number of both buyers and sellers came down, indicating an elevated level of uncertainty on the market, which is possibly inspired by the exceptionally low volatility on the US market. Even though US equity sentiment has cooled down, with the number of buyers almost halved from 43% to 25%, Danish fund buyers have a significantly more benign view on the asset class than their European peers. The percentage of US bulls is only higher in Germany and France.
A minority of Denmark’s fund selector community have lost confidence in European equities, but there is still a high number of buyers around. Almost half of the country’s fund selectors are still planning to increase their allocation over the next 12 months, while only one in ten say they will reduce exposure. The continued interest in European equities is not that surprising though, as Danish fund buyers only started to massively overweight EU stocks early this year. Like their Swedish and to a certain extent also their Norwegian counterparts, they are traditionally cautious allocating large parts of their portfolios to European equities.
Countering the trend
Contrary to the rest of Europe, appetite for absolute return products has steadily fallen over the past two years. Roughly two years ago 60% of Danish fund buyers were increasing their allocation to the asset class. In July this year, this has come down to only 25%.