The rating on the FTSE China A50 shifted to neutral last week, following a mostly bearish sentiment since June, following Beijing’s announcement of a stimulus package, according to strategists at Citigroup.
Along with the Hang Seng, both “saw the biggest weekly increase in positioning from new risk flows,” the strategists said in a note on Monday.
Most regional indices followed a similar path, but the increase in nominal levels was moderate. The bullish position in MSCI Emerging Markets remains the biggest among the indices tracked, reaching the highest levels in three years, Citi noted.
In the US, investors directed nearly $18 billion in new risk flows into the S&P 500 last week and about $5 billion into the Nasdaq. According to Citi, the S&P is now approaching lopsided and extended positioning, with net long par value in the 94th percentile, although average long gains remain small, reducing positioning risks.
The Nasdaq moved from neutral to bullish, while there was little change in positioning for the broader Russell 2000 index.
The strategists said that now “all 3 US indexes are showing an increasingly upward slope.”
Short positions in all US indices tracked are all in losses, with increasing chances of covering short positions, especially on the Nasdaq.
“Although average loss levels here are moderate (-2.5%), the larger-than-average (68th percentile) short-term nominal amount could come under pressure if growth-heavy index momentum continues/ technology,” strategic analysts said.
In Europe, investors remain mostly neutral on the Euro Stoxx 50 despite rising risk flows, reflecting limited optimism for the Eurozone.
This comes as Eurozone PMIs continue to contract and Germany’s Ifo business index declines, signaling a weaker economic outlook compared to other markets. However, positioning on the Eurostoxx moved higher, possibly indicating increased interest in value opportunities following China’s economic stimulus announcement, while positioning on the DAX, FTSE and Eurobanks were mostly unchanged.
ETF flows showed little sign of a change in sentiment, with unchanged flows for the Eurostoxx and negative flows for the DAX, FTSE and Euro Banks.
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Reference;
Karaahmetovic, V. (2024) S&P 500, Nasdaq and Russell 2000 all ‘exhibit an increasingly bullish skew’: Citi By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/sp-500-nasdaq-and-russell-2000-all-exhibit-an-increasingly-bullish-skew-citi-3642364 (Accessed: 1 October 2024).
