By Patturaja Murugaboopathy
Feb 5 (Reuters) – Global ex-U.S. equity funds are attracting strong inflows as investors shift away from high-valuation U.S. tech stocks toward more diversified, lower-valued markets abroad, driven by U.S. macro risks and a weaker dollar.
According to LSEG Lipper data, global ex-U.S. equity funds, including exchange-traded funds (ETFs), attracted $15.4 billion in inflows in January, the highest in 4-1/2 years. That compares with inflows of just $5.7 billion into U.S.-focused equity funds, the lowest in three months.
In the first week of February, ETFs investing in ex-U.S. markets drew a further $1.4 billion, the data showed.
The inflows into ex-U.S. markets come as global technology stocks face pressure over concerns about the rising costs of AI investments, with a recent selloff triggered by the launch of a new legal tool from Anthropic’s Claude large language model.
Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said he sees attractive opportunities outside the U.S., with China offering growth and yield potential, Japan’s upcoming election a possible upside catalyst and Europe set to benefit from higher defence and fiscal spending.
The MSCI World ex USA Index has risen 6.4% so far this year, outpacing the S&P 500, which is up 0.54%, after gaining 29.2% in 2025 compared with the S&P 500’s 16.39%.
“We expect global equities to rise around 10% by year-end, and investors with concentrated U.S. positions should benefit from diversifying into other markets,” said UBS’s Haefele.
Analysts said other global markets are set to benefit from a weaker dollar and expectations of U.S. rate cuts, which improve returns on assets denominated in non-U.S. currencies.
They added that overseas markets offer greater exposure to cyclical stocks, which tend to perform best when growth accelerates, unlike the U.S. market’s heavier concentration in technology shares.
The MSCI United States Index traded at a 12-month forward price-to-earnings ratio of 22.27 at the end of January, compared with 18.98 for the MSCI World Index, 15.18 for the MSCI Europe Index, and 13.59 for the MSCI Emerging Markets Index.
“Valuations remain a supportive backdrop,” said Derek Izuel, chief investment officer at Shelton Capital Management. “If the rate and currency dynamics persist, the rotation could have more durability than a short-term trade.”
(Reporting By Patturaja Murugaboopathy; with additional reporting by Gaurav Dogra in Bengaluru)
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