American investors bought in the first six months of 2013 $65 billion worth of European stocks, the highest amount for the first half of the year in the past 36 years, according to a report by the European division of Goldman Sachs that uses U.S. Treasury data.
Stock acquisitions were made by pension funds and other large investors in the U.S. at the highest level since 1977, seen as a sign of confidence in Europe’s ability to recover from the sovereign debt crisis, according to the Financial Times.
Signs of economic recovery and rising business confidence and also the expectations of corporate results in the second half of the year reflected in higher stock quotes restored the interest of American investors in shares of European companies.
“The economic story makes Europe a good bet. We expect European equities to keep rising as the continent recovers,” said the chief of the international equity division at Goldman Sachs Asset Management, Eddie Perkins.
“We see earnings surprising on the upside, which will act like a tailwind for European equities,” said Robert Parkes, equity strategist at HSBC.
According to the British group HSBC, European stocks are still undervalued by 15 percent compared to the long term average, despite increases in the past year. Quotations European stock markets rose 27 % from last June.
Capital markets are still facing substantial risks, including a possible U.S. attack on Syria, fears of instability in emerging markets, and the possibility of further worsening of the eurozone crisis.
Poor development of emerging markets is particularly a concern for European companies as they get about a third of revenues from such regions. A stronger than expected downturn would affect earnings and profits of companies in Europe.
Despite the risks, the fact that European equities are still cheap, encourages U.S. funds to investing more, according to the Financial Times. Preferred sectors for investment by Goldman Sachs and HSBC are financial, telecom and utilities businesses.
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