EUROPE WEEKLY KICKSTART: Equity supply is rising in Europe too

Research evidence excerpt

EUROPE WEEKLY KICKSTART: Equity supply is rising in Europe too

Goldman Sachs Europe Weekly Kickstart

issuance wave, when gross issuance approached ~3% of market cap with limited offsets (Exhibit 2).

Balance sheets are strong, reinforcing the opportunistic nature of issuance. Balance sheets remain healthy; European

corporates, financials, and households are, on aggregate, relatively well positioned. As a result, issuance is largely driven by

favourable market conditions rather than funding stress. Elevated valuations, currently in the top quartile, are enabling

companies to raise capital opportunistically. This creates a self-reinforcing dynamic: strong market absorption supports

further issuance, while any pushback on supply would quickly slow the pipeline, particularly in IPOs.

Flows remain a swing factor. International investors continue to provide incremental support but remain valuation-sensitive,

allocating to Europe primarily as a diversification trade rather than a high-conviction overweight. At the same time, domestic

investors have been net sellers, leaving aggregate flows only marginally positive since the onset of the Middle East conflict

(Exhibit 4). A sustained re-engagement of global capital likely requires clearer improvement in the macro backdrop,

particularly lower energy prices, with European gas prices and economic activity remaining key variables shaping sentiment

and allocation (Exhibit 5).

A capex cycle with room to run. Overall, we see no signs of oversupply (so far), suggesting companies can continue to raise

capital and invest, sustaining the capex upswing. We remain in a capex super-cycle and favour beneficiaries over spenders.