European companies and governments that are dumping more stock into the market than at any time since 2004 are finding buyers in managers receiving the most client cash in 11 years.
Block sales in western Europe reached $31.8 billion in the three months through September as Groupama SA sold shares in Societe Generale (GLE) SA and Sweden exited a stake in Nordea Bank (NDA) AB, data compiled by Bloomberg show. At the same time, investors poured about $22.2 billion into the region’s stock funds in the 15 weeks through Oct. 9, according to data from research firm EPFR Global Inc.
The ability of large shareholders to sell stakes they have held for years is a sign markets are healing after the European debt crisis, according to Maximilian Anderl at UBS AG. The Stoxx Europe 600 Index, which sank 21 percent from April 2010 to September 2011 as Greece, Ireland and Portugal accepted bailouts, has surged 47 percent since.
“Europe has started to get popular and that is demonstrated by these sales,” Anderl, who helps oversee $643 billion at UBS Global Asset Management in London, said in an interview. “The window is opening up for a lot of stakeholders who have been wanting to sell for the last four years. It doesn’t mean it’s an end to the rally.”
The Stoxx 600 has climbed 2.6 percent this month as U.S. lawmakers agreed to lift the nation’s borrowing limit, removing the risk of default in the world’s largest economy. The gauge has soared since September 22, 2011, as European Central Bank President Mario Draghi pledged to defend the single European currency and the 17-nation euro area emerged from a record-long recession in the second quarter of 2013. The index advanced 0.8 percent in London today for a seventh day of gains.
The level of block sales by shareholders in western Europe in the third quarter was the highest for that period in nine years, data compiled by Bloomberg show. Investors have raised $95.8 billion selling stakes this year, including additional offerings of shares by companies, the highest level since $117 billion of stock was sold in the whole of 2008, the data show.
Should the deals keep the pace through the fourth quarter, 2013 would see the largest volume of block trades since Bloomberg data starts in the 1990s.
Investors have pushed money into European stock funds for 15 straight weeks, the longest period since May 2002, according to data from EPFR. Money managers have the highest allocations to euro-region stocks in more than six years, according to a survey by Bank of America Corp.
“Investors who had written off Europe have started to build positions, and, I think, so far been happy to buy into the offerings,” Colin McLean, who helps oversee about $970 million as managing director at SVM Asset Management Ltd. in Edinburgh, said in a phone interview.
Sellers of blocks of shares can’t continue pushing equity into the market without affecting the rally in stocks, according to George Godber, who helps oversee $3.2 billion at Miton Group Plc in London.
“When you get to this level in sales, it is not a good sign for markets,” Godber, whose CF Miton U.K. Value Opportunities Fund (CFUGAIN) has climbed 14 percent since March, said in a phone interview on Oct. 11. “It’s indicative we’re closer to the top than to the bottom. It’s extraordinary how much is going on in placings, and it does suck up demand.”
Groupama, the Paris-based insurer, announced on Aug. 13 the sale of 1.9 percent in Societe Generale, France’s second-largest bank, raising 517 million euros ($707 million). Less than a month later, the insurer earned about 250 million euros placing shares in Eiffage, the construction company based in Asnieres-sur-Seine, France, whose stock has more than doubled since December 2011.
Groupama said it sold Societe Generale shares to help match its assets with “market risk” and offloaded Eiffage stock to “strengthen its financial leeway and reduce its exposure to market risks.”
Schaeffler AG, the largest investor in Hanover, Germany-based Continental AG (CON), raised 950 million euros on Sept. 17 by selling a 4 percent stake in Europe’s second-largest car-parts maker to reduce debt. Telegraaf Media Groep NV, the publisher of the largest Dutch newspaper, exited its holding in German broadcaster ProSiebenSat.1 Media AG on Sept. 6, making proceeds of about 391 million euros.
Governments seeking to cut debt were some of the biggest sellers of equities in the third quarter. Sweden sold a $3.4 billion stake in Nordea Bank, the Nordic region’s largest lender, on Sept. 25. The deal came a week after the U.K. sold a 3 billion-pound ($4.8 billion) holding in Lloyds Banking Group Plc (LLOY), its first disposal since bailing out the lender in 2008.
“The role of the state is to regulate banks, not to own them,” said Sweden’s Financial Markets Minister Peter Norman. The U.K. government said it offloaded the Lloyds stock to “get the best value for the taxpayer, maximize support for the economy and restore them to private ownership.”
Bankia, a Valencia-based bank that took state aid, did the third-biggest placing last quarter, when it dumped a 979 million-euro stake in Mapfre (MAP), Spain’s largest insurer. Bankia said the sale was a step in implementing its parent company’s strategy for the three years through 2015.
Europe’s biggest banks have more than doubled their highest-quality capital to $1 trillion since 2007 to meet tougher rules as regulators aim to prevent a repeat of the taxpayer-funded bank rescues of 2008.
The sales of equity blocks are coinciding with a jump in initial public offerings, where privately-held equity is made available for purchase by individual investors. The volume of IPOs in Europe more than doubled to $5.4 billion in the third quarter as investors lured by cheaper valuations and strengthening economies put their money to work in the region.
European stock indexes will climb 13 percent by the end of 2014, according to the average forecast in a Bloomberg survey of eight market strategists. The Stoxx 600 has rallied 13 percent so far this year and advanced 14 percent in 2012 as the ECB kept its key interest rate at a record low and the Federal Reserve maintained its bond-buying program.
For Javier Martinez-Piqueras at UBS AG, such central-bank stimulus will help ensure demand for equities. Investors withdrew more than $116 billion from European shares from May 2007 to September 2012 as the region’s debt crisis deepened, according to EPFR data.
“How much money, in all these years, has gradually gone out of the equity market, and how much money is still left to go back?” Martinez-Piqueras, co-head of European Capital Markets origination at UBS in London, said in a phone interview on Oct. 10. “Central banks’ strategy has created a vast amount of money that has to be invested somewhere. People are willing to tolerate a bit more risk.”