The volume of initial public offerings in Europe jumped more than sixfold in the third quarter as investors lured by cheaper valuations and strengthening economies put their money to work in the region.
IPOs in Europe surged at more than double the pace of those in the U.S., according to data compiled by Bloomberg, as Deutsche Annington Immobilien SE, Germany’s largest residential landlord, and U.K. property broker Foxtons Group Plc sold shares. Volume rose more than 10 percent globally compared with a year earlier, weighed down by a 40 percent drop in Asia.
Investors are returning to Europe after European Central Bank President Mario Draghi and German Chancellor Angela Merkel helped ease the region’s debt crisis and end the euro-area recession. While growth prospects at companies such as Twitter Inc. are stoking interest in U.S. IPOs later this year, $1 billion-plus offerings from the U.K.’s Royal Mail Group Ltd. and London-based Merlin Entertainments Group Ltd. may get a boost from funds flowing toward Europe amid limited growth potential in the U.S., where stocks have climbed to records.
“There is a perception that the majority of the region’s economic problems are behind us and we’re going to see lower volatility levels,” said Josef Ritter, head of equity capital markets for Europe at Deutsche Bank AG in London. “A key theme of this quarter was U.S. investors refocusing on Europe.”
U.S. investors bought more than $65 billion of European equities between January and May, the most since before the financial crisis, Goldman Sachs Group Inc. analysts including Sharon Bell and Matthieu Walterspiler said in a research report this month. U.S. funds that invest in European equities attracted $13.1 billion in the six weeks through Sept. 18, Societe Generale SA and EPFR Global data show, even as investors withdrew $16.9 billion from funds buying U.S. stocks.
Expensive U.S. equities this year following the S&P 500 Index’s 20 percent surge are making Europe a natural place to look for growth, said Hans Olsen, chief investment officer for the Americas at Barclays Wealth, a unit of Barclays Plc.
“It is very risky to be overweight at these prices so you start to look somewhere else. The standout was Europe,” Olsen said.
Member companies in the Euro Stoxx 50 Index are trading at about 13 times this year’s estimated earnings, compared with more than 19 for companies on the Nasdaq Stock Market and the Nikkei 225 Stock Average, data compiled by Bloomberg show.