European equity funds lead money inflows in the week ended Feb.1

European equity funds led money inflows in the week ended Feb. 1, buoyed by the lifting of China’s COVID-19 restrictions and hopes that the Federal Reserve would slow rate hikes as inflationary pressures ease.

European equity funds secured net inflows of $6.35 billion in the week, continuing their strong showing this year as investors hunt for battered stocks, which are available at cheaper valuations than U.S. shares.

Goldman Sachs expects European stocks’ outperformance to continue this year, as the earnings outlook for its commodity and financial sectors look stronger due to higher commodity prices and interest rates.

“While Europe has been outperforming since late 2022, it still trades at a discount compared with the U.S. in virtually every sector,” the brokerage said in a note on Thursday.

Investors put just $0.9 billion into Asian equity funds during the week through Feb. 1 and withdrew $436 million from U.S. equity funds.

Meanwhile, global bond funds attracted a net $5.9 billion, bolstered by softening price pressures.

Global short- & medium-term bond funds drew $2.36 billion, the biggest weekly inflow in three weeks. Investors also purchased corporate bond funds for a seventh straight week, worth $1.68 billion, but pulled out $1.03 billion from government bond funds after 12 weeks of net purchases.

Global money market funds, meanwhile, attracted $2.18 billion worth of inflows after two weeks of outflows.

Commodity funds’ data showed investors purchased $207 million worth of energy funds after two weeks of net selling. However, precious metal funds saw net outflows of $98 million after net inflows of $1.19 billion the previous week.

Demand for emerging market (EM) funds remained strong into the fourth week. EM equity funds saw $4.94 billion worth of inflows, while bond funds drew $1.22 billion worth of net buying, data for 24,451 funds showed.

“The China reopening has been the recent primary catalyst for EM. After years of zero-COVID policies, there is pent-up demand from consumers as well as possible relief on supply chains to the world that can contribute back to global growth,” said Marc Dizard, chief investment strategist at PNC Asset Management Group.

“This, on top of relatively low valuations to developed markets coming into the year, has really helped spark the recent run.”
Source: Reuters (Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Susan Fenton)