Despite almost clawing back most of the losses from earlier this year, Europe region-specific exchange traded funds remain one of the most unloved investment themes.
Investors continue to dump European stocks, which plunged 17% at the start of the year and are now near break even, even after the broader global market rally, reports Manisha Jha for Bloomberg.
According to a Bank of America Survey, money managers have taken money out of European equity funds for seven straight weeks, the longest stretch since October 2014.
For instance, the currency-hedged WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) was the third most unwanted ETF of the year, experiencing $2.1 billion in net redemptions so far this quarter, according to ETF.com. The outflows from the currency-hedged Europe ETF may have been exacerbated after the more dovish Federal Reserve stance weighed on the U.S. dollar, with the euro currency appreciating over 3% against the greenback.
Additionally, the non-currency-hedged iShares MSCI EMU ETF (NYSEArca: EZU) saw $1.3 billion in outflows year-to-date.
[related_stories]Even as European stocks rebounded over the past month, investors continued to shun the developed market. So far in March, HEDJ saw $758.2 million in outflows and EZU lost $811.8 million.
Investors who experienced the sell-off this year as the market entered a bear market have been loath to return amid a shaky recovery. Economic data has been falling short of expectations since January and analysts project a 1.6% dip in net income for Stoxx 600 companies for the year. Economic confidence is down for two months and forecasts are for a second monthly decline in consumer prices.
“Investors don’t really believe in the rally,” Chris Beauchamp, a market analyst at IG Plc, told Bloomberg. “It hasn’t been replaced by substantial equity buying and that is a worry. People are wondering where the good news is going to come from as we head into the next quarter.”
Most European market observers have been critical of European Central Bank President Mario Draghi’s stimulus measures. Specifically, many believe the measures have been too little too late, even after the ECB cut all three key rates this month and expanded quantitative easing.
iShares MSCI EZU ETF