Global Equity Fund Inflows Surge in September, HSBC Analysts Report
HSBC analysts have released a note indicating a significant increase in global equity fund inflows in September. This surge has been driven by recent rate cuts and substantial stimulus measures from China, leading to a remarkable 18% increase in global equities in the first nine months of 2024 - the highest returns since the post-financial crisis recovery in 2009.
In mid-September alone, global equity fund inflows reached $51 billion, marking the second-highest weekly inflows of the year. HSBC attributes this positive sentiment to the beginning of a more accommodative monetary cycle, including a 50-basis point rate cut by the U.S. Federal Reserve and other central banks, as well as China's stimulus efforts ahead of the holiday season.
European equity funds have also experienced a gradual recovery, reversing the outflows seen earlier in the year. HSBC anticipates that this positive momentum in fund inflows could continue in the coming weeks, driven by dovish central bank actions.
The UK has emerged as a defensive play for global equity funds within Europe, with investors favoring defensive UK equities over more cyclical eurozone markets. Despite UK equity holdings being stretched relative to the past five years, they are still below pre-Brexit levels.
Furthermore, HSBC sees potential for increased allocations to Europe's overseas-focused sectors, which are currently underweighted compared to historical levels. The healthcare sector, in particular, is highlighted as well-positioned, with a low relative holdings and an improving consensus outlook.
HSBC emphasizes the supportive outlook for Healthcare, backed by recent sell-side EPS momentum. This sector contrasts with utilities, where current fund positioning is high and earnings outlooks remain weak.
The easing monetary environment is expected to further bolster cyclical sectors, particularly technology, which may see limited downside.
Analysis:
Overall, the surge in global equity fund inflows indicates a positive sentiment among investors, driven by recent rate cuts and stimulus measures. This trend could continue in the coming weeks, with potential opportunities in defensive UK equities and overseas-focused sectors in Europe. The healthcare sector, in particular, stands out as a well-positioned investment option. Additionally, the easing monetary environment is expected to support cyclical sectors like technology. Investors may consider adjusting their portfolios to take advantage of these trends and potentially benefit from the current market conditions.