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Where is the money flowing amidst the investment exodus from the US?


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In light of the uncertainty surrounding the US economy, investors have begun to diversify their investment portfolios and move some of their money into assets in Europe and China, so how important is this trend?

The Financial Times reported that investors have withdrawn $34 billion from U.S. equity funds this 2023, with $10 billion going to European equity funds, while flows to Asian funds totaled about $16 billion.

It is not difficult to explain this trend: at the end of last year, American indices fell more than European ones, and the outflow of capital from the American market is associated with the banking crisis in the United States and the continuous growth of the main interest. the interest rate of the US Federal Reserve, which has already reached five percent, which increases the likelihood of an economic downturn.

Monetary policy is being tightened by most countries, but the consequences of this move are varied, for example, technology companies, which are betting on the US, have declined due to higher interest rates than companies in the financial and commodity sectors, which are targeting Europe.

In Europe, the Stoxx 600 rose for four consecutive quarters and outperformed the US S&P 500 during the year. This is the best result for the European index since 2008.

As for the interest in Asian financial stocks, it is associated with the expectations of a quick recovery of the Chinese economy after the release of the quarantine. “China and other Asian countries are now becoming a magnet for investors,” says analyst Sergei Suferov. “According to official estimates, the Chinese economy will grow by 5 percent this year. In addition, there are many attractive stocks in the Chinese financial market. .”

While the US is expected to grow by only 1% or even enter into a recession in a negative scenario.

For her part, economist Natalya Malekh believes that the interest rate differential works in China’s favor, as the Chinese regulator keeps key interest rates low, unlike the US.

Source: Prime

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