Eurozone gaining ground: ECB crowding-out effects dwindling

Having only recently focussed on the latest portfolio flow data from the USA, we are now casting a glance at the Eurozone. As is the case in the USA, thus far “only” data up to and including November 2018 have been released, but the trends for the year are nevertheless clearly discernible. While the USA has in recent years benefited from massive repatriation of capital, in the Eurozone capital outflows outweighed, on the part of both foreign investors and above all their local counterparts. In the years 2015 to 2017 this led to capital totalling EUR 940 billion being withdrawn from Euroland, whereby capital exports by local investors came to no less than EUR 1.4 trillion. In 2018 a recovery set in at long last. Domestic investors continued to send capital abroad, but the volume amounted to EUR 155 billion and was thus well down on the figures seen the prior year; indeed, of late the first instances of repatriation have been seen. This trend was especially noticeable as regards the thrust of equity purchases. That said, in the field of bonds, capital exports have also dwindled, having fallen by slightly more than half. What is less positive is the pattern seen among foreign investors: while they remained net buyers of EMU securities, the capital inflows in 2018 were less than in previous years. This is above all attributable to muted demand for equities. On the positive side, the sell-out of EMU bonds which posed a massive strain in the years 2016 and 2017 has come to a standstill. It remains to be seen whether the investors dare to re-enter the market this year now that the ECB is withdrawing. This would lay solid foundations for the Euro.


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