Date
20 September 2017
Stocks have risen since the Bank of England’s rate cut but outflows from European equity funds continue. Photo: Financial News Today
Stocks have risen since the Bank of England’s rate cut but outflows from European equity funds continue. Photo: Financial News Today

Asian stocks benefit as funds leave European markets

Over the past week, global equities and Hong Kong stocks have done well.

Supported by better than expected US job data, US equities hit new highs.

The Dow Jones and S&P 500 indices rose 1.2 percent and 0.6 percent, respectively, and NASDAQ rallied 1.7 percent.

However, turnover was on the low side.

After a rate cut and other monetary easing measures in Britain, investors responded by buying into European equities.

Germany’s DAX, Britain’s FTSE 100 and France’s CAC index gained 5.4 percent, 3.1 percent and 3.2 percent, respectively.

That said, however, more than US$20 billion flowed out of European equity funds in the four weeks to July 20.

The trend is expected to continue given negative interest rates in Europe.

So far, Asian markets have benefited the most, attracting US$10.8 billion during the period.

The Chinese yuan has lost 7 percent against the US dollar since a surprise devaluation a year ago.

The renminbi is likely to stabilize by the end of the year.

A weaker yuan benefits Chinese exporters and SOEs.

Despite the weaker currency, inflation stayed low and that should give Beijing room to unveil further stimulus which would bolster A shares.

This article appeared in the Hong Kong Economic Journal on Aug. 12

Translation by Julie Zhu with additional reports

[Chinese version 中文版]

– Contact us at [email protected]

RA

Founder and Managing Director of Pegasus Fund Managers Ltd.

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