Investors shift USD bns out of US equities amid growth concerns, weakening USD

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.

THE CLOSING BELL: TADAWUL-

The TASI fell 0.1% yesterday on turnover of SAR 4.2 bn. The index is down 10.6% YTD.

In the green: Liva (+8.8%), Nice One (+7.3%) and Sasco (+6.3%).

In the red: Chemanol (-8.7%), Sidc (-7.2%) and Nahdi (-4.8%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.7% yesterday on turnover of SAR 45.6 mn. The index is down 16.3% YTD.

In the green: Future Care (+29.7%), Academy of Learning (+24.0%) and Mayar (+14.6%).

In the red: Balady (-5.9%), Edarat (-5.6%) and Taqat (-4.5%).

CORPORATE ACTIONS-

Middle East Pharma Industries’ (Avalon Pharma) board approved a SAR 22 mn dividend payout for 1H 2025 at SAR 1.1 per share, it said in a disclosure to Tadawul yesterday. The distribution date is set for 15 September.

Cenomi Centers’ board greenlit a SAR 178.1 mn dividend payout for 1Q 2025 at SAR 0.375 apiece, it said in a disclosure to Tadawul yesterday. The distribution is slated for 15 October.

Saudi Top for Trading’s top brass approved a SAR 3.6 mn dividend payout for 1Q 2024 at SAR 0.3 per share, set to be distributed on 14 September, it said in a disclosure to Tadawul yesterday.

Naba Alsaha Medical Services’ board recommended a 100% capital increase to SAR 210 mn through bonus share issuance, it said in a disclosure to Tadawul yesterday. The SAR 105 mn increase will be funded by tapping SAR 93 mn from retained earnings and SAR 12 mn from reserves, with shareholders receiving one bonus share for every share they own.

Eligible Acwa Power rights holders who have not yet received compensation can now collect their funds from any Saudi National Bank branch, the company said in a disclosure to Tadawul yesterday. The compensation is for subscribers whose initial bank transfers for Acwa Power’s SAR 7.1 bn rights issue failed due to incorrect or incomplete banking information.