Global investors are increasingly shifting capital away from US stock markets, funneling USD 13.6 bn into global equity funds outside the US in July — the biggest inflow since December 2021, Reuters reports, citing data from LSEG Lipper. Meanwhile, US-focused equity funds saw USD 6.3 bn in outflows, marking the third consecutive month of net withdrawals. The exodus comes amid mounting investor macro concerns, worries of overvalued stocks, and a weakening greenback.

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The shift began earlier this year, as investors grew wary of President Donald Trump’s protectionist economic agenda and its effect on US assets. “While tariff de-escalation was a tailwind in the second quarter, unresolved trade negotiations and policy deadlines approaching in the early third quarter pose ongoing risks,” said Shelton Capital Management CIO Derek Izuel. He warned that persistent uncertainty “could reignite flows out of US equities, particularly if growth differentials continue to narrow or the Federal Reserve maintains restrictive monetary policy.”

Investors are now turning to markets with lower valuations, easier monetary conditions, and improved growth prospects. Both the MSCI Emerging Markets EMEA Index and MSCI Europe Index are up over 19% YTD, while the MSCI Asia Pacific ex-Japan Index is up 14% — both outperforming the S&P 500, which is up just over 7.2% so far this year.

Adding to the pressure to relocate capital outside the states is a weakening greenback, which is down around 10% YTD. This has, in turn, boosted returns from overseas investments for USD-based investors.

Valuation gaps are also hard to ignore, with the 12-month forward price-to-earnings ratio for the MSCI US Index standing at 22.6, compared to 14.4 for MSCI Asia, 14.2 for MSCI Europe, and 19.7 for the MSCI World Index, further underlining the appeal of non-US markets.

But some say it’s just a rebalance, not a retreat. While the scale of July’s shift is significant, not all analysts see it as a fundamental reversal of the US equity story. “We see this recent trend as more of a strategic rebalancing to neutral positioning from a geographic perspective and less of an adoption of any underweight to the US,” SEI CIO Jim Smigiel told the newswire.

MARKETS THIS MORNING-

Asian markets are mixed in early trading this morning — Japan’s Nikkei is in the red, down 1.4%, while the Shanghai Composite and Hang Seng are in the green, looking at gains of 0.5% and 0.4%, respectively. South Korea’s Kospi is flat.

EGX30

35,855

-0.4% (YTD: +20.6%)

USD (CBE)

Buy 48.25

Sell 48.39

USD (CIB)

Buy 48.30

Sell 48.40

Interest rates (CBE)

24.00% deposit

25.00% lending

Tadawul

10,763

-0.1% (YTD: -10.6%)

ADX

10,283

-0.1% (YTD: +9.2%)

DFM

6,091

-0.4% (YTD: +18.1%)

S&P 500

6,467

+0.3% (YTD: +10.0%)

FTSE 100

9,165

+0.2% (YTD: +12.1%)

Euro Stoxx 50

5,388

+1.0% (YTD: +10.1%)

Brent crude

USD 65.63

-0.7%

Natural gas (Nymex)

USD 2.82

-0.4%

Gold

USD 3,408

0.0%

BTC

USD 123,388

+2.7% (YTD: +32.0%)

S&P Egypt Sovereign Bond Index

887.67

+0.2% (YTD: +14.2%)

S&P MENA Bond & Sukuk

147.90

0.0% (YTD: +5.7%)

VIX (Volatility Index)

14.49

-1.6% (YTD: -16.5%)

THE CLOSING BELL-

The EGX30 fell 0.4% at yesterday’s close on turnover of EGP 3.9 bn (25.4% below the 90-day average). International investors were the sole net buyers. The index is up 20.6% YTD.

In the green: Misr Cement (+4.0%), Egyptian Kuwaiti Holding -EGP (+1.5%), and Egyptian Kuwaiti Holding -USD (+1.0%).

In the red: Qalaa Holdings (-6.2%), Madinet Masr (-3.1%), and Egypt Aluminum (-2.5%).

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