Equity investment changes direction again

The torrent of equity investment out of emerging markets into developed ones kept flowing hard for the first part of the year, according to Nick Arbuthnott, managing director of EMEA global markets intelligence for Ipreo. Chinese and Indian stocks were the big losers while North American equities outpaced Europeans two to one in attracting global investment dollars. With the sovereign debt crisis still dogging Europe, however, emerging markets are starting to get fresh capital again.

Arbuthnott will be one of the session leaders at the IR Magazine Euro Leaders Think Tank on June 30, 2011, an invitation-only event held in London for top IROs from across Europe. He will be joined in a panel discussion by Magdalena Moll, head of IR at BASF, which won the grand prix at last year’s IR Magazine Europe Awards. This year BASF is nominated for 10 awards – more than any other company.

The panel’s topic is targeting non-domestic investors, which includes tracking capital flows to figure out where interest in a particular stock might lie, in terms of both geography and investment style.

‘We saw a massive shift in mid-Q4 2010, when reports started coming in of the biggest ever reversal of a 14-year bias toward emerging markets,’ Arbuthnott recounts. ‘Most of it was flowing out of China and India. Russia was wobbly at the beginning but it proved totally immune as the oil price went up. Brazil, too, is immune. Observers like EPFR Global say they had never seen anything like this flood of money heading back to developed market economies.’

Interestingly, hedge funds helped pick up some slack, keeping up their interest in emerging markets while their mutual fund counterparts fled.

So far in 2011 a preference for North American equities over European stocks shows there is still a ‘residue of doubt’ about Eurozone countries. Still, some money kept coming into Europe, including emerging Europe, with Turkey and Poland both seeing net investment during Q1.

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[Article by Neil Stewart, IR magazine]

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