Asia FX muted, dollar fragile as CPI data boosts Sept rate cut bets
Investing.com - European equity funds are leading global equity inflows year-to-date at approximately 8% of total assets under management, according to a recent HSBC report. Global equity fund inflows have reached about 2% of total assets under management, marking the highest level since 2021.
The rotation into European equities is supported by both ETFs and non-ETFs, with the latter historically pulling money out of the region. This shift likely indicates a change in investor outlook toward regional equities, HSBC notes. The US-EU trade deal announced on July 28, 2025, further reduces policy uncertainty and could support regional flows, though HSBC analysis indicates a potential 5% fall in overall net income for European corporates in aggregate for a 15% hike in import tariffs by the US.
Healthcare emerges as a potential contrarian opportunity, being the most unloved sector by global funds on a 5-year z-score basis. Despite the sector’s underperformance against global equity benchmarks year-to-date, the pace of decline in funds’ sector holdings exceeds the fall in its benchmark weight. HSBC suggests a swift resolution of uncertainty related to ongoing US ’section 232’ investigations into semiconductors and pharmaceutical products could result in unwinding of relative underweight sector positioning.
In Europe, regional funds are increasing their German allocations, approaching the highest level since late 2019. HSBC believes there remains scope for further investment, citing improving business sentiment, supportive monetary policy, and signs of economic recovery as positive factors for German equities on a relative basis.
European Financials are highlighted as another sector with potential, with consensus turning more positive as evidenced by the sector having the highest EPS estimate momentum across all sectors in Europe. HSBC economists expect limited cuts in regional policy rates in the second half of 2025, which could support the sector, particularly banks.
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