Investor sentiment has risen sharply from the lows of July and global fund managers have increased allocations to equities, most notably in Europe, according to the BofA Merrill Lynch Survey of Fund Managers for August.
A net 15% of the 173 panellists participating in the global survey believe that world economy will get stronger in the coming 12 months. This represents a monthly swing of 28 percentage points, the largest leap in confidence since April to May 2009, when the world emerged from the credit crunch. In July, a net 13% said the economy would weaken.
Fears about the outlook for corporate profits have reduced since July. A net 21% of the panel expects profits to deteriorate in the coming year, down from a net 38% a month ago.
The fresh optimism comes amid growing expectations of intervention by the European Central Bank (ECB). The proportion of the panel ruling out more quantitative easing by the ECB has halved to 9%, while 38% expect the ECB to act during the third quarter (up from 29% in July).
Ossiam ETF EURO STOXX 50 Equal Weight NR (L5EW)
- Provides exposure to the EURO STOXX 50 Index,
- All constituents are weighted equally, offering
- Equal weight approach avoids concentration and trend
- Collateralised swap-based replication
- UCITS compliant, London listed, UK Reporting
China’s economy is also providing optimism with a net 14% of the regional panel saying China’s economy will improve – the most positive reading since November 2010.
“August’s surge in confidence seems to be more a triumph of policy projection and potential than positive economic data. As indicated by the survey, the risk is now that inaction by policy makers would lead to a negative reaction in global markets,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research.
Bearish view of eurozone has eased
Having turned their backs on Europe, especially the eurozone, for much of 2012 investors are becoming far less bearish on the region. Significantly, there are more investors wanting to underweight US equities than eurozone equities.
A net 5% of investors want to underweight eurozone equities – down from a net 18% in July. A net 9% wants to underweight the US, compared with a net 6% looking to overweight US equities in July. Fewer investors are at the same time saying that EU sovereign debt is the largest tail risk while more are nervous about the US “fiscal cliff.”
Actual allocations to Europe have risen. A net 13% of asset allocators say they are currently overweight eurozone equities, down from a net 26% in July. Fewer investors within Europe are concerned about the regional economy. A net 23% of the regional panel expects the economy to weaken in the coming year, down from a net 33% a month ago.
For UK-based investors looking to access European equities, there are a number of London-listed ETFs to consider, tracking a range of different indices.
The following seven ETFs track the EURO STOXX 50 Index, Europe’s leading blue-chip index for the eurozone. The EURO STOXX 50 Index provides large-cap exposure to supersector leaders in the eurozone. The index covers 50 stocks from 12 eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
DB X-trackers EURO STOXX 50 ETF (XESC) TER 0.00%
HSBC EURO STOXX 50 ETF (H50E) TER 0.15%
Credit Suisse EURO STOXX 50 ETF (CS51) TER 0.20%
Lyxor ETF EURO STOXX 50 TR (MSEG) TER 0.25%
UBS-ETF EURO STOXX 50 (UB01) TER 0.35%
iShares EURO STOXX 50 ETF (EUE) TER 0.35%
EURO STOXX 50 Source ETF (SDJE50 GR) TER 0.15%*
*Listed on Xetra but UK registered with UK Reporting Status
The following ETF from Ossiam tracks the performance of the equally-weighted version of the EURO STOXX 50 Index NR. The EURO STOXX 50 Equal Weight Index NR has the same constituents as the market-capitalisation weighted index (see above), but each company in the Equal Weight index is allocated the same weight (2% in normal circumstances).
Ossiam ETF EURO STOXX 50 Equal Weight NR (L5EW) TER 0.30%
The following three ETFs track the MSCI EMU Index. The MSCI EMU Index is a free float-adjusted market-capitalisation weighted index that is designed to measure the equity market performance of countries within the European Economic and Monetary Union (EMU). The index consists of the following 11 developed market country indices: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, and Spain.
Amundi ETF MSCI EMU (CMU) TER 0.25%
Credit Suisse MSCI EMU ETF (CEU1) TER 0.33%
UBS-ETF MSCI EMU (UB06) TER 0.40%
The following ETF from iShares tracks the FTSEurofirst 80 Index. The FTSEurofirst 80 Index offers exposure to the 60 largest eurozone companies measured by market capitalisation in the FTSE Euro zone Index and 20 additional companies selected for their size and sector representation.
iShares FTSEurofirst 80 ETF (IEUR) TER 0.40%
The following ETF from iShares tracks the MSCI Europe ex-UK Index. The MSCI Europe Index is a free float-adjusted market-capitalisation weighted index that is designed to measure the equity market performance of the developed markets in Europe. The index consists of the following 15 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and Switzerland.
iShares MSCI Europe ex-UK ETF (IEUX) TER 0.40%
The following ETF from Invesco PowerShares tracks the FTSE RAFI Europe Index. The FTSE RAFI Europe Index is designed to track the performance of the largest European equities, selected based on the following four fundamental measures of firm size: book value, income, sales and dividends. The index consists of stocks from the United Kingdom, France, Germany, Switzerland, Spain Netherlands, Italy, Sweden, Finland, and Denmark.
PowerShares FTSE RAFI Europe ETF (PSRE) TER 0.50%
Many of the above ETFs are cross listed on European exchanges including the Deutsche Borse, Borsa Italiana, Euronext, and SIX Swiss.