Investing.com — European equity funds appear to be rotating out of France and into the UK, HSBC said, as concerns over France’s fiscal outlook weigh on investor sentiment.
The broker recently cut France to “underweight,” citing a worsening fiscal backdrop, weaker economic forecasts and deteriorating analyst expectations, according to a Sept. 23 report.
European equity funds have remained resilient overall, while economic data surprises and business sentiment have improved, HSBC said.
The broker recently raised its year-end target for the STOXX 600 to 680, pointing to a growing shift by European companies towards their domestic markets.
Global equities, measured by the FTSE All-World index, rose 2.4% in the third quarter of 2026 so far, HSBC said. The fourth quarter has historically been the strongest period for both equity fund flows and market performance, it added.
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European investors continue to favour domestic sectors over foreign-exposed ones, with positioning now high relative to historical levels.
But weaker earnings momentum at these companies suggests investors may be taking on more exposure than their underlying earnings outlook supports, HSBC said.
Technology has the strongest earnings growth outlook in Europe for 2027, with consensus forecasts pointing to 27% growth.
However, earnings expectations have been weakening, while the sector remains among the least-owned relative to its history. Investor exposure is starting to recover, HSBC said. The broker remains “overweight” technology.
Healthcare has a weaker earnings outlook, with consensus forecasts calling for earnings growth of 5% in 2026 and about 9% in 2027. Sentiment towards the sector has improved following upgrades after second-quarter results, but HSBC remains “neutral.”
Financial stocks continue to benefit from high bond yields, HSBC said. Investor positioning has recovered but remains below historical highs, leaving room for further buying if interest rates remain supportive.
HSBC’s economists expect the European Central Bank to raise interest rates twice, in December and February, which could continue to support financial stocks, the broker said.
Original Article
HSBC says investors are shifting funds from France to UK
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