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Investors pull money from equities for first time in 6 weeks: BAML

[LONDON] Investors pulled US$2.2 billion from equity funds in the past week - the first outflows in six weeks - with emerging markets and US stocks the biggest losers, Bank of America Merrill Lynch (BAML) said on Friday.

European equity funds attracted US$1.7 billion of inflows in the week to Nov 18, but this was offset by US$2.4 billion of outflows from emerging markets and US$1.8 billion of outflows from US equity funds, according to the BAML data, which also includes numbers from Boston-based fund tracker EPFR Global.

European equity funds have benefited from inflows in 25 of the past 27 weeks, as investors have bet on more monetary stimulus from the European Central Bank.

ECB president Mario Draghi has repeatedly stated that the bank stands ready to revive inflation in the euro zone by expanding its asset-buying programme.

But it was money market funds that attracted the lion's share of inflow, sucking in US$15.6 billion, as investors remained"short conviction", BAML said. Money market funds have now received US$120 billion over the past seven weeks.

Emerging markets equity funds recorded their biggest outflows in 10 weeks, with EPFR Global noting that retail redemptions had hit levels not seen since late August.

The growing consensus that the US Federal Reserve will raise interest rates in December, the fact that commodity prices are languishing at multi-year lows, and continued uncertainty about China's economy have kept emerging markets under pressure, EPFR Global said.

Year-to-date outflows from emerging market funds now top US$86 billion, the biggest redemptions since 2008, BAML said. But with Fed hike expectations peaking, "humiliated EM" could be ripe for a bounce, the bank suggested.

Some US$2.5 billion was pulled from bond funds, with US$1 billion flowing out of EM debt funds. Around US$900 million came out of high-yield bond funds and some US$800 million from investment-grade bond funds - the first outflows in six weeks.

Commodities drew the largest inflows in 12 weeks, attracting US$1.1 billion, mostly via oil and energy funds.

Crude oil futures are still below US$45 a barrel due to over-supply, but EPFR Global suggested some investors may be positioning for a rebound partly on the back of the stepped-up war against Islamic State in the Middle East.