A JPMorgan Chase report shows that international investors have long ended their wait-and-see approach toward US stocks, with institutional funds making a strong comeback, recording net purchases of $114 billion in a single month, reaching the highest level since November last year.

According to JPMorgan Chase analysis, foreign investors' "buyers' strike" on US stocks ended as early as May, with institutional investors beginning to buy into momentum-driven rallies.

During the first four months of this year, international investors had been avoiding investments in US stock exchange-traded funds (ETFs), but this situation changed in May.

In a report released Wednesday, JPMorgan Chase's global quantitative strategy team emphasized the need to distinguish between overseas retail investors and institutional investors and hedge funds. Overseas retail investors still appear uninterested in US stock ETFs listed on international exchanges, but "real money" investors have returned to ETFs registered in the United States.

The decline in the US dollar may explain foreign investors' reluctance to re-engage with US stocks as enthusiastically as they did in the second half of last year, as this would hurt their returns.

However, institutions more adept at using currency hedging strategies to protect returns have returned en masse to buy US-listed ETFs, purchasing a total of $114 billion in May, the largest net purchase since the US presidential election in November last year.

Of this $114 billion, approximately $35 billion came from funds registered in the Caribbean region, indicating hedge fund participation as well.

The JPMorgan Chase team led by Nikolas Panigirtzoglou investigated which markets benefited from cross-border capital flow shifts, finding that European stock markets attracted $95 billion in capital inflows through the end of May, with most concentrated in January and February this year.

However, in the second quarter, this trend weakened with Europe experiencing mild capital outflows, while Japan attracted $44 billion in capital inflows, becoming the focus of attention.

Trends in fixed income markets were also broadly similar to equity markets. Like equities, capital flows into US Treasuries also saw a sudden $31 billion reversal in April, but subsequently resumed positive trends.

European bond markets also performed well in May, receiving $109 billion in new capital commitments, but Japanese bonds were severely affected by duration premium risks (concerns over putting money into long-term investments amid debt situation worries), showing slight negative growth.

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