Investors have been pouring money into euro zone investments and - if current euro strength versus the dollar is any judge - are still doing it, finding European equities and even bonds relatively attractive. Many strategists expect the trend to continue for the time being, although some are wary that the summer/autumn buying spree could unravel with rising valuations, spiking oil prices and a renewed bout of euro strength.
The overall view is not that the euro zone is any kind of investment star. It is more that it's the best of a bad lot, that in a world of low yields and slowing growth, Europe has a bit more to offer.
Hence, if it loses its edge its appeal will disappear quickly.
"Its not so much an absolute case, it is more of a relative case. Europe looks relatively better," said Klaus Wiener, chief economist at AM Generali Invest in Cologne.
The euro zone economy, which has lagged the United States, Japan and many emerging markets, has been in catch up mode and attracting investors as the United States in particular shows signs of slowing.
Figures released by the European Central Bank (ECB) on Tuesday underlined the extent. A net 9.6 billion euros ($12.28 billion) flowed into the 12-nation currency bloc in August, some 5.1 billion of it in portfolio investment.
This compared with July net outflows of 39.2 billion euros.
"Portfolio investment was boosted by net purchases of euro area equities by non-residents worth 15.1 billion euros. These were only partly offset by 11.1 billion euros in net purchases of foreign equity," the ECB said in a statement.
For those who bought, it wasn't a bad bet. The DJ Euro STOXX index of 50 blue chips rose more than 10 percent between a low in mid-August to a high in early October, although the index has dipped fairly sharply since.
The demand for euro zone investments is based mainly on a view that the euro zone is behind the global economic cycle and thus still in a rising phase as others slip.
Equities are considered cheaper, corporate earnings more likely to rise and interest rates more stable.
Georgio Radaelli, chief global strategist with private bank and asset manager BSI in Lugano, Switzerland, told clients:
"In terms of regions we prefer Europe and Switzerland where the cycle of interest rate hikes ... gives less cause for concern and where it is more likely that corporate earnings will surprise on the upside."
He told Reuters that European earnings could be lagging the US by three to six months.
Even in cases where investors become bearish on an asset class, chances are that Europe will be one of the areas where they are less bearish.
Pictet Asset Management's, for example, has recently sold nearly all of its main fixed income portfolio's corporate bonds and has cut back on US Treasuries, sensing a potentially sharp sell off in global debt.
But within that it likes the euro zone. "European bonds will be hit as well, but they will outperform on the way down," said Rajeev De Mello, Pictet's head of international bonds in Geneva.
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