Global Equity Fund Inflows Experience Strong Rebound in September: HSBC

HSBC analysts highlighted a significant rebound in global equity fund inflows in September, attributing this surge to recent interest rate cuts and unexpected stimulus measures from China. According to their report, global equities have experienced an approximately 18% increase in the first nine months of 2024, representing the strongest returns for this period since the recovery following the 2008 financial crisis.

In mid-September, global equity fund inflows reached their second-highest weekly total of the year, amounting to $51 billion. The bank indicated that the positive market sentiment largely stems from a shift towards a more accommodative monetary policy, which includes a 50-basis point rate cut from the U.S. Federal Reserve and similar actions from other central banks, alongside China’s pre-holiday stimulus initiatives.

European equity funds have also shown signs of gradual recovery, reversing many of the outflows seen earlier in the year. HSBC expressed optimism that momentum in fund inflows may persist in the coming weeks, driven by the dovish stance of central banks.

In the UK, the market has emerged as a defensive option for global equity investors, benefitting from a preference for stability among investors. Notably, investors have favored defensive UK equities over more cyclical eurozone markets. Although UK equity positions are somewhat stretched compared to the last five years, they remain below pre-Brexit levels.

HSBC also sees potential for increased investments in sectors focused on international markets within Europe, which are currently underweighted relative to historical norms. The healthcare sector, in particular, is recognized as well-positioned, with low relative holdings and a positive consensus outlook. The bank noted increased sell-side earnings momentum in healthcare when compared to other sectors like utilities, which are experiencing high fund positioning and weaker earnings prospects.

Overall, the current easing of monetary policy is expected to further bolster cyclical sectors, especially technology, which is perceived to have limited downside risk.