Long-term investors, such as pension funds, turned net buyers of Europeanequities in September after largely missing out on the hedge fund-driven summerrally, analysts at UBS say in a note.
"Hedge funds were net buyers of the market through August, but long-onlyaccounts were net sellers. This fits with the long-run trend: since 2005 hedgefunds' net flows have had a positive correlation with the market (+0.19),long-only a negative one (-0.23)," they write.
"Hedge fund net leverage is now at a four-month high and gross leverage thehighest since 2007. Long-only investors have just turned net buyers inSeptember," they add.
Most of the net buying has focused on non-euro countries UK and Sweden whileinvestors were small net buyers of Italy in September, the analysts write.However Spain, which saw its main stock index rally strongly over the summer,has continued to see net selling.
Among the sector shifts noted by the bank are a swing to net buying ofmining stocks in September after the United States launched its third bout ofquantitative easing, while net buying of banks has faded, they add.
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Keywords: MARKETS EUROPE STOCKSNEWS