Despite 50% Gain, Banks Yet to Win Over Europe Fund Managers

  • Lenders regained status as biggest industry group on Stoxx 600
  • Still, they have a smaller proportion in many portfolios: HSBC

Banks may have beaten every industry group on the Stoxx Europe 600 Index since a July low in share prices, but European fund managers are still underweight.

While money managers have turned less bearish and now own the most bank shares since mid-2015, lenders still make up a smaller proportion of portfolios than they do in equity benchmarks, according to HSBC Holdings Plc. That’s despite a 50 percent rally in the past six months through Tuesday. The Stoxx 600 Banks Index rose another 0.6 percent at 12:55 p.m. in London, poised for a fourth day of gains.

“This gives an indication of how depressed fund holdings have been in European banks over the last 10 years,” HSBC strategists including Amit Shrivastava and Robert Parkes wrote in a note on Wednesday. “We believe that it is too early to call the end of the pain trade.”

Lenders are once again the biggest industry group on the Stoxx 600, accounting for almost 13 percent of the index after falling to third place in 2016. HSBC strategists have an overweight recommendation on European banks, saying the sector will fare well this year due to rising bond yields and fewer regulatory hurdles. Click here for more strategist views.

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