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European equity outflows highest since September

EUROPE– European investors are selling off their equity holdings because of the recent sharp declines in the stock markets, according to the latest European fund flow research published by Schroder Salomon Smith Barney (SSSB). The aggregate outflow for June reached €2.1bn, the largest since last September, when a net total of €12.6bn was sold.

SSSB says all the countries surveyed reported redemptions of equities but the selling spree was dominated by Italy and Spain, where investors sold a total of €1.7bn worth of equities in June. Only the UK reporting a positive flow at €300m.

Moreover, the Dow Jones STOXX European index dropped by 9% in June and SSSB predicts further uncertainty among retail investors who have already seen the value of their portfolios fall by 35% during the last two years.

Outflows in the US reached $27bn (€28bn) but SSSB points out that equity weightings for portfolios held by continental European investors remains low at 35% compared with both the UK and the US. This would explain both the larger magnitude of equity selling by US investors and the UK’s marginally positive figures, says SSSB.

SSSB says European investors are moving their holdings into cash and money market funds and only a sustained recovery in the equity markets will persuade them to switch their investments back into equities.

However, SSSB’s rolling 12 month aggregate for equity investments in Europe actually rose to €9.8bn and initial estimates for the total of net cross border flows in May show that €21.8bn was invested by investors outside Europe on Eurozone equities.

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