Quantitative easing and a weaker euro Attracts dollar flows to equity funds
US invasion of the shares of the euro area
After a sharp decline in the euro more than once in recent months, the tourism industry hopes to continental Europe to have a strong season this summer. With quantitative easing for the euro zone, which is a mood for the holidays in European financial markets program, the US stock investors metaphorically throwing Mnashvhm on the beach.
Equity funds have seen in the euro, which Taatakbha “EPFR” to provide funds data, flows denominated funds in dollars of $ 2.2 billion last week, making the total area of the March toward billion – Total strongest for any month since it began “EPFR” data in 1996.
US invasion helped create momentum for shares of the style you
Caused by quantitative easing in the United States. Rose Euro Stoxx 600 index about 16 per cent since the beginning of 2015 so far, compared to the S & P 500 hard in the United States.
Cameron Brandt, research has “EPFR” director says: “The dollar investors believed they got the last drop of the United States.” Among developed markets alternative “Europe is the obvious choice.”
The growing preference for investors to hedge funds flows, against the backdrop of further declines in the euro, they believe that the effects of quantitative easing program before any further. With regard to the dollar, Euro Stoxx 600 Index is up by only 4 per cent since January (January), which highlights the importance of hedging a weak euro for foreign investors. The danger is that the trades have become overcrowded, or that the impact of the work of the European Central Bank fading, or that the recovery of the euro zone depends, what a coup occurs in investor sentiment.
Michael Barakos, large investors in European equities at JPMorgan Asset Management, says: “The irony is that these hedging flows come, while the euro has already fallen.” He adds: “Human behavior is always trying to respond to what just happened.”
He says one of the bankers Europeans angrily: “I received a letter from someone in New York, which says that all hedge fund was buying based on high German DAX message.”
And increased foreign demand for shares of the euro zone even before the ECB carried out the first operation for the purchase of bonds in the ninth of March. The purchase of the shares of foreign operations in the euro zone in January (Jan) is the highest for almost four years, according to data from the official balance of payments.
The latest show, “EPFR” data that American investors crowded into eurozone equities funds faster than local investors throughout the first quarter, and the sterling and the yen and the Swiss franc, the pound relatively stable flows. It also shows that the German equity funds received this year, the largest flows, although the proportion of flows to assets under management was the largest in Greece and Portugal.
As well as flows in the funds listed on stock exchanges in the United States, but that have dealings with the euro area, during the current quarter is the largest three times what it was earlier, according to data from Markit. The flows in funds focused on Germany is the largest four times. Most of these flows go to Snaig exchange traded on the stock exchange, the competent hedge currency.
The popularity of Germany shed light on how investors bet that the effects of quantitative easing in the weakening of the euro program will be concentrated on the shares of export companies.
Graham Secker, European equity strategist says at Morgan Stanley: “Foreign investors look mainly to the euro zone as a ‘transfers of currency trading.’ DAX index has become a very popular way for them to do the job.” And the superiority of the German index comfortably in his performance on the rest of Europe, gaining more than 20 percent so far this year, although the comparisons are considered distorted because the DAX index includes dividends.
One of the concerns is that the accumulation in the German stock is a clear strategy. Andrew Barry, head of equities at Hermes Investment says: “There was this response instinctive reaction that says: Well, the euro has fallen so much. This would be in favor of exports, Germany has the best exporters.”
But that does not necessarily mean that inflows in the euro zone will be reflected soon. Nick Nelson, equity strategist at UPS says: “Europe’s performance was lower than the performance of the United States for nearly seven years – and was relatively poor performance in terms of the dollar value of nearly 40 per cent. Has just started to excel once again.” He adds: “The economic indicators and a weaker euro and oil prices low are all supportive factors for Europe against the United States.”
According to Barry: “You should stand for a moment and say: Oh my God, I’ve been much progress. So I am a bit cautious in the short term, but will probably be American investors look for the euro area wider, rather than focus only on Germany.”
There may be what supports capital inflows for the euro zone flows, which are continuing signs that the region is recovering from the crisis years that passed by – despite the acute debt problems in Greece. The main purchasing managers’ index in the region rose in March for the fourth consecutive month.
And whether foreign capital will continue to flow, it depends on “how the economy in response to the program of quantitative easing,” according to Nicholas Banejertz Ihsanoglu, strategic specialist at JP Morgan. If quantitative easing program and the euro continued to strengthen the weakest link in the PMI “, the inflows in the shares of the euro area will continue, but if we drop the index again – which is unlikely to happen because of the great height – then a lot of investors will reap the profits.”