LONDON: Smaller northern European stock markets are luring investors keen to escape fresh political and debt market risk in the south but loath to pay for entry into traditional safe-haven Germany.
Political uncertainty in both Spain and Italy, particularly linked to the latter's post-election gridlock, has cut demand to buy into markets on the euro zone's periphery that had been fostered by a European Central Bank pledge to protect the euro.
While many investors still like Germany's blue-chip DAX index for its high-quality exporters, it is more expensive than at previous times of market stress and some are seeking better value in places such as Austria and the Nordics.
"In many people's minds, Germany remains the market to favour. The reality, however, may be different," said Roche-Brune Asset Management fund manager Gregoire Laverne, whose firm manages some 93 million euros ($121 million) of assets.
Data from fund flow tracker EPFR Global showed German equity funds have seen net outflows of $1.15 billion so far this year while Nordic markets had in-flows of $338 million and Austria $2.1 million.
This reflected the fact that while investors were mindful that the Nordic and Austrian markets were riskier and less liquid, they were prepared to overlook that risk due to the potentially bigger gains on offer.
The combined market capitalisations of the benchmark Oslo OBX-25 and of the Austrian ATX-20 both represent around 8 percent of the combined market capitalisation of the DAX 30 index.
This relative lack of scale can make smaller markets riskier and more volatile than the DAX, making it harder to unwind losing bets.
However, traders expressed little concern over this given thei Austrian and Norwegian indexes' scope to outperform in the context of expectations that a gradual economic recovery in 2013 will lift stock markets.
A Reuters poll last month showed global investors had raised their equity holdings to a 10-month high despite problems in the euro zone.
"Liquidity is not a concern," said Michael Adam Adler, head of equities at Denmark's Alm Brand Asset Management, who favours Nordic stocks.
Adler and other investors added Norway and Austria also had attractive valuations, with the DAX just 6 percent off its all-time 2007 high, while Austria remains 50 percent off its all-time peak, implying that Austria had the scope for bigger gains.
indiatimes.com
Political uncertainty in both Spain and Italy, particularly linked to the latter's post-election gridlock, has cut demand to buy into markets on the euro zone's periphery that had been fostered by a European Central Bank pledge to protect the euro.
While many investors still like Germany's blue-chip DAX index for its high-quality exporters, it is more expensive than at previous times of market stress and some are seeking better value in places such as Austria and the Nordics.
"In many people's minds, Germany remains the market to favour. The reality, however, may be different," said Roche-Brune Asset Management fund manager Gregoire Laverne, whose firm manages some 93 million euros ($121 million) of assets.
Data from fund flow tracker EPFR Global showed German equity funds have seen net outflows of $1.15 billion so far this year while Nordic markets had in-flows of $338 million and Austria $2.1 million.
This reflected the fact that while investors were mindful that the Nordic and Austrian markets were riskier and less liquid, they were prepared to overlook that risk due to the potentially bigger gains on offer.
The combined market capitalisations of the benchmark Oslo OBX-25 and of the Austrian ATX-20 both represent around 8 percent of the combined market capitalisation of the DAX 30 index.
This relative lack of scale can make smaller markets riskier and more volatile than the DAX, making it harder to unwind losing bets.
However, traders expressed little concern over this given thei Austrian and Norwegian indexes' scope to outperform in the context of expectations that a gradual economic recovery in 2013 will lift stock markets.
A Reuters poll last month showed global investors had raised their equity holdings to a 10-month high despite problems in the euro zone.
"Liquidity is not a concern," said Michael Adam Adler, head of equities at Denmark's Alm Brand Asset Management, who favours Nordic stocks.
Adler and other investors added Norway and Austria also had attractive valuations, with the DAX just 6 percent off its all-time 2007 high, while Austria remains 50 percent off its all-time peak, implying that Austria had the scope for bigger gains.
indiatimes.com
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