US Investors net buying of European equities has hit a record $126bn
over the last 12 months. Now above the 2007 peak of $109bn. This doesfeel like a spike, but it is worth pointing out that it has been going
on for just over 1 year and follows almost 5 years of famine. It may
even explain some of the strength in the Euro.
What about within Europe? UBS clients have been shifting more to the
"core" markets of Germany and France (both seeing decent inflows in the
last 4 weeks). But the periphery has split: investors have been buyers
of Spain and selling Italy. Spain has been the high beta play on a
recovery in risk appetite in the EuroZone - it troughed relative to
Italy just before Draghi launched the OMT and then sharply outperformed.
But now seems to be giving some of that out performance up.
What about the sectors?
Investors have just turned small net sellers of cyclicals in Europe for
the first time since in May 2013. In the last 4 weeks they have been
heavy sellers of Construction and Media. In contrast, they have turned
net buyers of Consumer Staples for almost the first time in a year and
solid buyers of Utilities for only the second time in the last two
years.
At an aggregate level UBS client flows are basically net neutral over
the last 4 weeks. But this masks a gap: Long Only investors have been
buying into the rally over the last month, whilst Hedge Funds have been
net sellers and their net leverage ratio has fallen back to 0.32x - well
below recent peaks of 0.66x.