European equity ETFs suffered renewed outflows in the month following Brexit, despite a reversal of this trend in June, the month when the referendum took place, as spooked investors rushed to take money out of Europe.
TrackInsight’s latest monthly figures for July show Developed Markets Europe Large Cap ETFs shed some €2.9bn over the month of July alone, after seeing moderate inflows of €378m in June, showing that the reversal seen during the referendum month was only temporary.
The outflows trend has continued for much of the year, with the three months to the end of May showing some €8.6bn leaving European equity ETFs, but the funds took in €378m in June, suggesting investors may have been taking advantage of the low valuations following the sell-off in European markets.
The outcome of the EU referendum, announced on the 24th June, caused European stock markets to plummet initially, with the EuroStoxx 50 falling 9% after the result was announced, and the FTSE 100 sliding 8.3%. The European index remains nearly 10% lower year to date, which indicated continued risk aversion when it comes to this asset class, but the FTSE 100 is now 9.5% higher.
Among concerns affecting European equities are uncertainty about the implications of a Brexit for the UK and the rest of the eurozone, worries about contagion risk to other countries, and a crisis in the Italian banking sector.
As investors try to optimise their allocation strategies, European equity ETFs were some of the most traded products in July, with the iShares Core DAX UCITS ETF seeing €1.5bn worth of trading over the month, while the iShares Core FTSE 100 product came second with €1.4bn.
Meanwhile, Global Markets Large Cap ETFs also saw a reversal of inflows, shedding some €270m over the month of July, which contributed to €1.6bn of outflows over the three months to the end of July.
However, emerging markets remained resilient as the likelihood of a rate hike by the Federal Reserve was pushed further into the future – these ETFs attracted €599m during the month.
In the bond space, the biggest beneficiary of the latest economic and political events has been high yield, which had suffered outflows of €420m in June. In July, however, Developed Market Corporate High Yield ETFs took in nearly €2bn of investors’ money.
All in all, the latest flows show investors in July were taking a cautious approach with assets affected by the outcome of the EU referendum in the UK as the full implications begin to become clearer, and have been putting their money elsewhere for the time being.