Credit Suisse says this has been a critical source of support for sterling, beyond that provided by global reserve managers looking for a haven from the eurozone debt crisis. “This, in our view, partially explains sterling’s resilience to poor economic data and to the Bank of England’s increasingly dovish policy surprises,” the bank says.
So far this year, net inflows into the US and the eurozone have been flat, in contrast to 2011, which saw large net outflows from the US into the single currency area.
Elsewhere, activity is consistent with last year’s trends. Surplus countries such as Japan and Switzerland have been on the funding side, while commodity exporters such as Australia and Canada have been on the receiving end of M&A activity.
| UK top recipient of M&A year to date |
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| Source: Credit Suisse |
Deals into Canada and Australia have been concentrated in the commodity sectors.
In contrast, for the UK and Sweden, which have received a comparable amount of inbound M&A activity as a proportion of GDP, inflows are spread across a wider set of industries, most notably technology, financial services and energy.
| US and EU show flat M&A balance in 2012 |
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| Source: Credit Suisse |
Credit Suisse notes that in Sweden’s case, the inflows primarily relate to divestiture by Swedish companies of overseas holdings, whereas for the UK, there have been more outright purchases of UK companies.
“One implication is that the UK and Sweden might be less vulnerable than Canada and Australia to an interruption in M&A flows if commodity prices continue to moderate,” the bank says.