Global equity funds see big outflows as rate outlook shifts

6:18 am Friday, January 19th, 2024

(Reuters) – Global equity funds witnessed hefty outflows in the week up to Jan. 17 as investors trimmed positions after central bankers in the U.S. and Europe pushed back against market expectations of an early interest rate cut.

Investors pulled a net $8.68 billion out of global equity funds during the week, logging the third straight week of outflows, data from LSEG showed.

Hopes of a policy rate cut in March dimmed on Tuesday as U.S. Federal Reserve Governor Christopher Waller cautioned against trimming rates until lower inflation can clearly be sustained, echoing remarks from some of his European counterparts.

The U.S. and European equity funds saw net selling of$9.23 billion and $1.48 billion, respectively. Conversely, Asia funds attracted about $1.72 billion, the second successive week of inflows.

Global sectoral equity funds raked in about $329 million in inflows during the week. The tech and financials were the more popular sectors, with $713 million and $390 million, respectively, in net purchases.

The consumer discretionary sector, however, saw outflows worth $285 million.

Investors showed strong interest in debt funds, pumping a net $14.33 billion into global bond funds during the week, the biggest amount in about a year.

Corporate bond funds received $5.92 billion, the largest amount since at least April 2020. Government and high-yield bond funds also secured around $1.12 billion and $1.65 billion, respectively.

At the same time, investors exited about $28.51 billion worth of money market funds, breaking a three-week-long buying streak.

In the commodities segment, outflows from precious metal funds eased as investors withdrew $181 million when compared with about $805 million of net disposals in the previous week. Meanwhile, energy funds faced outflows of $209 million.

Data covering 27,982 funds in the emerging markets showed investors shed roughly $904 million worth of equity funds after a week of net buying. Bond funds, however, secured inflows for a fourth successive week, amounting a net $198 million.

(Reporting by Gaurav Dogra in Bengaluru; Editing by Tasim Zahid)