April 12, 2017 / 9:25 AM / 7 months ago

U.S. investors return to European equities gathers pace: UBS

LONDON, April 12 (Reuters) - U.S. investors, drawn by a brightening European earnings outlook and relatively cheaper valuations than at home, are pumping more funds into regional stocks, according to data from UBS.

Flows data from UBS showed that U.S. net buying of European equity exchange-traded funds (ETFs) in March was the highest since October 2015. European ETFs suffered 11 straight months of outflows last year.

Stronger earnings in Europe have tempted investors back to a region which has been beset by political risks, commodity prices and its exposure to emerging markets in recent years.

First quarter earnings in Europe are set to increase 7.1 percent from the same period in 2016, which would be an increase of 2.8 percent excluding the Energy sector, according to Thomson Reuters I/B/E/S data.

Last year the pan-European STOXX 600 index declined 1.2 percent, compared with a 9 percent rise for the S&P 500 . Currently the STOXX 600 is up around 6 percent in 2017.

At the sector level, UBS said that they have seen a slowdown in reflation trade beneficiaries, which gathered pace in the second half of 2016 when investors rotated into cyclical sectors such as banks, industrials and commodity-linked firms.

Instead, investors have been buying pharma and Switzerland, which has seen the biggest net buying since UBS’ data began in 2005. (Editing by Vikram Subhedar)

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