European equity funds attract bumper inflows

European flagsNet inflows into European equity funds again exceeded $4 billion (€2.9 billion) in the third week of the year, underlining rising investor confidence in the eurozone.

European equity funds accounted for 43% of the net inflows to developed market equity products in the first three weeks of the year, says fund data provider EPFR Global, compared with 13% in the first three weeks of 2013.

A further sign of confidence is that inflows into countries that were most hurt by the eurozone debt crisis, such as Portugal, Italy, Ireland, Greece and Spain, have been strong this year.

Investors continue to withdraw money from emerging market equity funds and “currencies in Turkey, South Africa, the Ukraine and Argentina began to buckle” in the third week of the year, the data firm says.

The expectation that tapering of the US Federal Reserve's bond-buying programme will strike these markets hard is likely to be driving investor sentiment.

However, investors are plugging money into frontier market funds, hoping to benefit from strong growth expectations in countries such as Nigeria. Net flows into frontier market equity funds were positive for the 47th week out of the 55 weeks since the beginning of 2013, says the firm.

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