Global equity fund flows fall on economic worries: EPFR

Global equity fund flows fall on economic worries: EPFR

Hong Kong: Global fund flows into equities fell in the week ended 4 November as policymakers shifted focus to unwinding stimulus measures, while unemployment continued to rise, making investors question what will drive economic growth next year, fund tracker EPFR Global said on Friday.

Outflows from equity funds totalled $5.42 billion during the week and outflows from all emerging market equity funds were at an 11-week high.

Fixed-income funds drew net inflows of $3.63 billion - their worst showing since early July.

Only six of 24 major global funds and fixed-income fund groups tracked by EPFR Global registered inflows during the week, despite additional liquidity resulting from another week of heavy outflows from money market funds.

Global bond funds drew fresh money for a 30th week. US bond funds remained attractive, absorbing $2.1 billion, and short-term debt funds led the way.

Outflows from money market funds rebounded to $27.3 billion for the week.

Global emerging market equity funds surrendered $539 million as fresh doubts about the health of Western European banks, whose subsidiaries financed East European and Baltic economies, weighed on sentiment across Europe.

East European equity funds saw outflows for the first time in 16 weeks and redemptions from Russian equity funds hit a year-to-date high.

BRIC - Brazil, Russia, India, China - equity funds overall drew inflows for an eighth week but Brazil funds saw outflows for the first time in eight weeks.

US equity funds posted outflows for the fifth time in six weeks, with US small cap funds hit hardest. US growth funds outperformed value funds, however.

In Japan, weak domestic demand and renewed deflation posed questions about Japan’s economic recovery and Japan equity funds saw outflows for a seventh week. As deflation makes holding cash more attractive, regional money market funds benefited.

Sector funds

Financial sector funds saw $798 million in outflows, the biggest outflow since the fourth week of March, amid concern about further recapitalization of UK banks and bad results from Europe. The bankruptcy of US lender CIT and a rate rise in Australia also discouraged investors.

Commodity funds continued to attract money for a ninth straight week, helped by India’s $6.7 billion gold purchase to hedge its foreign reserves.

Technology funds and consumer goods funds posted outflows of $226 million and $216 million respectively.