Investors raise euro zone equity exposure

GLOBAL INVESTORS raised their euro zone equity exposure to the highest level in at least five years in August, citing loose central bank policy, robust growth and strong company earnings.

They cut their US stock holdings to 13-month lows. The findings come from a monthly asset allocation poll of 48 fund managers and chief investment officers in Europe, the United States, Britain and Japan, conducted between August 16 to 29.

In this period, the euro zone delivered its best manufacturing performance in six-and-a-half years despite a strong euro, whilst the European Central Bank (ECB) maintained its ultra-easy monetary policy.

Poll participants lifted euro zone stock allocation to 20.5 per cent of their global equity portfolios.

Almost 90 per cent of managers who answered a question on the outlook for European equities saying they could touch fresh highs this year.

Since May the market has come off the boil and looks set to end August down 0.7 per cent, yet managers cited cheap relative valuations, strong growth momentum and positive earnings revisions as reasons to be cheerful.

Didier Saint-Georges, managing director and member of the investment committee at Carmignac, struck a note of caution. Although he thought a shortterm recovery was possible, he said analysts’ estimates were no longer being revised upwards and ECB tapering was looming.

“If the U.S. market holds its own, there is room for a second wind in European equities. Otherwise, the latter will struggle to perform much,” he said.

Investors cut their U.S. equity holdings by almost one per cent to 38.5 per cent in August, the lowest level since July 2016.