Global Equity Fund Inflows Rebound

Investing.com — HSBC analysts noted a significant increase in global equity fund inflows for September, influenced by recent rate cuts and unexpected stimulus from China.

According to HSBC, “Global equities are up around 18% in the first nine months of 2024,” marking the highest returns for this duration since the post-financial crisis recovery of 2009.

In particular, global equity fund inflows saw the second-highest weekly total of the year, with $51 billion recorded in mid-September, as reported by the bank.

HSBC attributes this positive sentiment to the commencement of a more accommodating monetary cycle, which includes a 50-basis point rate cut from the U.S. Federal Reserve, along with actions from other central banks and China’s early holiday stimulus measures.

European equity funds have also experienced a gradual recovery, reversing many of the earlier outflows recorded in the year. HSBC anticipates that “the positive momentum in fund inflows might continue over the coming weeks,” fueled by dovish central bank policies.

In Europe, the UK has emerged as a defensive strategy for global equity funds, benefiting from a cautious investor sentiment. HSBC observed that “investors seem to have preferred defensive UK equities over more cyclical eurozone markets,” indicating UK equity holdings remain lower than pre-Brexit levels despite being stretched relative to the last five years.

HSBC sees potential for increased allocations to Europe’s overseas-focused sectors, which are currently underweighted compared to historical averages. The healthcare sector is noted to be particularly well-positioned due to low relative holdings and an improving consensus outlook.

“We think that the outlook for Healthcare is more supportive as the sell-side EPS momentum has surged recently,” stated HSBC, especially when contrasted with sectors like utilities, which have high fund positioning and weak earnings outlooks.

The easing monetary environment is anticipated to bolster cyclical sectors, particularly technology, which may experience limited downside.