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Charmed by US tax plans, investors buy stock, bond funds

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Investors are showing increasing comfort wading into the markets, lavishing cash on US-based stock and corporate bond funds in the latest week, Lipper data showed on Thursday.

[NEW YORK] Investors are showing increasing comfort wading into the markets, lavishing cash on US-based stock and corporate bond funds in the latest week, Lipper data showed on Thursday.

Those stock funds attracted US$2.7 billion during the week ended Feb 22, their fourth consecutive week of inflows, and taxable bond funds took in another US$4 billion, the research service's data showed. The bond funds have gathered money for eight straight weeks.

US President Donald Trump, in an interview on Thursday with Reuters, spoke favourably about a tax proposal that could cut corporate tax rates and exempt US export revenues from federal taxes but impose an implicit 20 per cent tax on imports.

Pat Keon, senior research analyst for Thomson Reuters Lipper, said markets are increasingly charmed by tax cut and deregulation proposals touted by Republicans, including Mr Trump.

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"There's a lot of enthusiasm in the markets for that, a lot of positive investor sentiment," said Mr Keon.

"It seems like every day there's another mini-controversy in the news about things not related to the economy, and it seems to be holding the administration back from getting going on the economy," Mr Keon said. "You wonder how long the markets and investors will keep waiting."

For now, the optimism continues, with US$2.6 billion moving into investment-grade bond funds, their 10th straight week of inflows. High-yield bond funds attracted US$726 million, Lipper said.

The lion's share of money in stock funds has moved into exchange-traded funds.

For the week, stock ETFs attracted US$2.9 billion while mutual funds posted withdrawals of US$176 million. Mutual funds are seen to represent retail investors' moves, while ETFs reflect a range of investors, including institutions such as hedge funds.

The US Federal Reserve released the minutes of its last policy meeting on Wednesday, which showed its officials believe it may be appropriate to raise interest rates again "fairly soon" should jobs and inflation data come in line with expectations.

Investors withdrew cash from energy stock funds and interest rate-sensitive utilities and real estate funds over the last seven days, while shuffling more money into banks and technology, the data showed.

Overall, demand for stock funds was roughly evenly split between funds that invest at home and those that invest abroad.

REUTERS

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