LONDON, April 25 The stampede out of euro zone
equity funds last year is reversing, with up to $100 billion of
inflows potentially in the pipeline as investors buy into the
improving economy and take heart from the more favourable
The first round vote of the French presidential election on
Sunday, which put centrist Emmanuel Macron on course for a
convincing victory in the second round on May 7, has cemented
the positive view of many banks and brokers on the euro zone.
Figures on Tuesday from Thomson Reuters Lipper show that net
flows into European mutual funds in Europe in March totaled 65.1
billion euros, the third consecutive monthly inflow and bringing
the year-to-date total up to 210.5 billion.
That covers the whole gamut of asset classes, including
bond, money market, commodity and equity funds. Estimates vary,
but the growing consensus is that flows into the region's equity
markets in the coming months are poised to accelerate.
Recent figures suggest the euro zone economy is growing at
its fastest rate in years, much faster than the U.S. economy.
Wages are rising, unemployment is falling and credit conditions
are easing as well.
Equity strategists at Barclays expect European corporate
earnings growth of around 15 percent this year compared to 10
percent for the S&P 500.
They note that the outflow from European equity funds last
year of around $100 billion, equivalent to around 10 percent of
assets under management, should return.
"We expect these outflows to quickly reverse," Barclays
equity strategists wrote in a note to clients on Tuesday titled
'Inflows Ahoy!'. "We envisage the coming months to resemble
previous periods of heavy inflows into European equities
relative to other regions."
Euro zone stocks have risen around 9 percent so far this
year, outperforming Wall Street's 6 percent rise.
Analysts at Bank of America Merrill Lynch say the solid
economic backdrop points to strong earnings growth this year,
perhaps higher than its current estimate of 11 percent.
"European equity fund flows have significant room to
recover," Bank of America Merrill Lynch analysts said in a note,
referring to the cumulative $103 billion outflow last year.
Analysts at JP Morgan note that euro zone equities have
attracted chunky inflows in recent weeks of around 1-3 percent
of assets under management. Given the scale of outflow last
year, there's room for that to increase more, further widening
the earnings growth gap over the United States.
"Flows are turning, and there could be much more to go,"
(Reporting by Jamie McGeever; editing by Mark Heinrich)