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European investors face increasing risks amid renewed market volatility

Autor: Financial Market
Timp de citit: 1 minute

The European Securities and Markets Authority (ESMA), the EU’s securities regulator, has published the second Trends, Risks and Vulnerabilities (TRV) report for 2019.

The report identifies a deteriorating outlook for the asset management industry and continued very high market risk. Recent trade tensions have triggered renewed volatility, and concerns over a no-deal Brexit remain key risk drivers for the second half of 2019.

Investors are facing very high market risk, as they navigate an environment of potentially inflated asset valuations, subdued economic growth prospects, and flattening yield curves. Changed monetary policy expectations may boost their risk appetite and reignite search-for-yield strategies, leaving investors vulnerable to volatility episodes and abrupt shifts in market sentiment.

Credit risk and liquidity risk remain high, with isolated events highlighting pockets of risk in the asset management industry. While the level of credit risk is stable, the deteriorating quality of outstanding corporate debt, the growth in leveraged loans and collateralised loan obligations should warrant the attention of public authorities. As a result, ESMA’s risk outlook for the asset management sector has deteriorated.