U.S. fund managers await more drops in European stocks before buying

NEW YORK European shares fell broadly Monday as Greece edged closer to defaulting on its debt, yet some U.S. equity fund managers said that they were waiting for further declines before they considered it a buying opportunity.

“We’re not in oversold territory yet,” said Michael Testorf, who helps manage the $53.8 million RSQ International Equity fund. “We just lost what we made over the last two weeks.”

The Euro Stoxx 600 fell 2.6 percent to 386.17, a level it last touched on June 19. For the year, the index was up 12.7 percent even with Monday’s declines.

Testorf, who had been expecting to use a wide market selloff on Monday to increase his position in Italian bank stocks, said he was now waiting to see if stocks pull back more this week before making a move.

Likewise, Alan Gayle, director of asset allocation at RidgeWorth Investments, said neither he nor the manager of his firm’s international fund was jumping into European stocks.

“We view this crisis as an evolving buying opportunity,” he said.

Greece is grappling with newly imposed bank controls that have made it difficult to withdraw cash in the country.

Talks between Athens and its creditors broke down over the weekend after Prime Minister Alexis Tsipras called a surprise referendum on the austerity cuts in an aid package proposed by Greece’s creditors. Late on Sunday, Tsipras announced moves to prevent a collapse of the banking system.

Despite the concerns about Greece’s ability to repay its debts, the European economy continues to expand, suggesting that shares should rebound if Athens and the so-called Troika of creditors can find a way to avoid a market catastrophe, said Brent Schutte, a portfolio manager of the BMO Multi-Asset Income fund.

His fund was not buying on Monday because “we’re fully expecting further upside even if we do end up missing some of the rebound,” he said.

The fund may increase its holdings of European stocks should the selloff deepen later in the week, he added.

“This has not yet risen to the level of a screaming buying opportunity,” he said, “so we’re not trying to get cute now.”

(Reporting by David Randall- Editing by Lisa Von Ahn)