EUROSTOXX 50Long
Global investment trends: Europe loses capital, China and India
Reasons for record outflows from European funds (-56 billion dollars)
The main reason for European fund outflows is the slowdown in economic growth of the region. After the energy crisis of 2022-2023, EU economies have never been able to return on a path of sustainable growth. High interest rates, which the European Central Bank continued to keep in place to fight inflation, have had a negative impact on business activity and investment attractiveness.
In the face of such challenges, yields in Europe have become lower than in the US. Moreover, European companies, despite the isolated successful cases, do not have a clear advantage. For example, if we take Germany, which has always been considered to be the flagship of Europe, we can see, that it is clearly losing momentum: plant closures, mass layoffs, and industrial problems are all systematic indicators. Europe currently is a region with a set of isolated appealing ideas, not a place where it is worth investing broadly.
The aforementioned green energy sector, for example, in theory could be Europe's strength, but in practice China offers similar technologies for cheaper, and imposing protective duties is not a long-term solution. Moreover, the energy dependence on Russian gas and current support for Ukraine seem to be policies without a concrete plan for the future. It's precisely why the money is going to the States: everything is predictable there, yields are higher, and the dollar is stronger.
Factors influencing investor behavior
In regards to China in 2024, it started to come back to life after a rather difficult period. China was an ideal investment destination for a long time, thanks to double-digit growth rates. But after the pandemic and a series of crises - such as the mortgage crisis - the pace has slowed and confidence in the market has been shaken. Meanwhile, China's auto industry and a number of other sectors continue to grow. The $130 bln invested in Chinese funds is more the effect of a low base and pent-up demand than a real breakthrough. Yes, China remains an important player, but now with a few caveats: it is no longer the magnet for investment that it used to be.
Reasons for increased demand for Chinese funds (record 130bln in funds this year)
India, on the other hand, looks extremely promising. Since the beginning of 2024, $20 bln has been invested there, which is a record amount. This is due to both structural reforms and the fact that India is perceived as the new China: a fast-growing economy with a huge population. In contrast to China, there is less geopolitical risk, and when investors invest in an Indian company, they are really buying a business, not a political or ideological story.
Comparison of India (+20bln, the best record of all time) and Brazil (withdrawals -3.3bln Funds)
It's different with Brazil. 2024 was a year of political turbulence for this country. Municipal elections and fear of populism have caused investors to withdraw money from the country. No one wants Brazil to become a second Argentina. Geopolitical risks are the main reason for capital outflows from Brazil and Mexico.
Forecasts for fund demand next year
Looking ahead to 2025, the US mid-cap, the broad market in India and new opportunities in the Middle East, such as the Emirates, are worth paying attention to. The US will continue to attract investment, especially with its strong dollar and clear politics, and Europe, as it seems, is finally losing its charm.
NIFTY
TASI
The main reason for European fund outflows is the slowdown in economic growth of the region. After the energy crisis of 2022-2023, EU economies have never been able to return on a path of sustainable growth. High interest rates, which the European Central Bank continued to keep in place to fight inflation, have had a negative impact on business activity and investment attractiveness.
In the face of such challenges, yields in Europe have become lower than in the US. Moreover, European companies, despite the isolated successful cases, do not have a clear advantage. For example, if we take Germany, which has always been considered to be the flagship of Europe, we can see, that it is clearly losing momentum: plant closures, mass layoffs, and industrial problems are all systematic indicators. Europe currently is a region with a set of isolated appealing ideas, not a place where it is worth investing broadly.
The aforementioned green energy sector, for example, in theory could be Europe's strength, but in practice China offers similar technologies for cheaper, and imposing protective duties is not a long-term solution. Moreover, the energy dependence on Russian gas and current support for Ukraine seem to be policies without a concrete plan for the future. It's precisely why the money is going to the States: everything is predictable there, yields are higher, and the dollar is stronger.
Factors influencing investor behavior
In regards to China in 2024, it started to come back to life after a rather difficult period. China was an ideal investment destination for a long time, thanks to double-digit growth rates. But after the pandemic and a series of crises - such as the mortgage crisis - the pace has slowed and confidence in the market has been shaken. Meanwhile, China's auto industry and a number of other sectors continue to grow. The $130 bln invested in Chinese funds is more the effect of a low base and pent-up demand than a real breakthrough. Yes, China remains an important player, but now with a few caveats: it is no longer the magnet for investment that it used to be.
Reasons for increased demand for Chinese funds (record 130bln in funds this year)
India, on the other hand, looks extremely promising. Since the beginning of 2024, $20 bln has been invested there, which is a record amount. This is due to both structural reforms and the fact that India is perceived as the new China: a fast-growing economy with a huge population. In contrast to China, there is less geopolitical risk, and when investors invest in an Indian company, they are really buying a business, not a political or ideological story.
Comparison of India (+20bln, the best record of all time) and Brazil (withdrawals -3.3bln Funds)
It's different with Brazil. 2024 was a year of political turbulence for this country. Municipal elections and fear of populism have caused investors to withdraw money from the country. No one wants Brazil to become a second Argentina. Geopolitical risks are the main reason for capital outflows from Brazil and Mexico.
Forecasts for fund demand next year
Looking ahead to 2025, the US mid-cap, the broad market in India and new opportunities in the Middle East, such as the Emirates, are worth paying attention to. The US will continue to attract investment, especially with its strong dollar and clear politics, and Europe, as it seems, is finally losing its charm.
NIFTY TASI 
CEO Mind-Money.eu
👉 mind-money.eu
Personal website of Julia Khandoshko:
👉 iuliia-khandoshko.com/
👉 mind-money.eu
Personal website of Julia Khandoshko:
👉 iuliia-khandoshko.com/
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