Global Equity Fund Inflows Surge in September on Rate Cuts and China Stimulus - HSBC Analysts
HSBC analysts have reported a significant rebound in global equity fund inflows in September, driven by recent rate cuts and generous stimulus measures from China. According to HSBC, global equities have seen an 18% increase in the first nine months of 2024, marking the highest returns since the post-financial crisis recovery in 2009.
The bank noted that global equity fund inflows hit their second-highest weekly total of the year in mid-September, reaching $51 billion. This positive trend is attributed to the start 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 proactive stimulus efforts.
European equity funds have also experienced a gradual recovery, reversing earlier outflows. HSBC predicts that this positive momentum in fund inflows may continue in the coming weeks, driven by dovish central bank actions.
In the European market, the UK has emerged as a defensive play for global equity funds, with investors showing a preference for defensive UK equities over more cyclical eurozone markets. Despite the UK equity holdings being stretched relative to the past five years, they remain below pre-Brexit levels.
Additionally, HSBC sees potential for increased allocations to Europe's overseas-focused sectors, particularly the healthcare sector. The bank highlights the healthcare sector as well-positioned, with low relative holdings and an improving consensus outlook. This sector is expected to outperform compared to sectors like utilities, where fund positioning is high and earnings outlooks are weak.
The easing monetary environment is projected to further support cyclical sectors, with technology being highlighted as a sector that may see limited downside.
In summary, the recent surge in global equity fund inflows, driven by rate cuts and stimulus measures, presents opportunities for investors to capitalize on the positive momentum in the market. Defensive plays like UK equities and sectors with strong growth potential, such as healthcare, are expected to perform well in the current economic climate. It is crucial for investors to stay informed and consider reallocating their portfolios to take advantage of these trends.
