Global equity funds see fourth weekly outflow on rate hike expectations

GLOBAL equity funds continued to record outflows in the 7 days to Sep 14 as a higher than expected reading on US inflation raised bets that the Federal Reserve would remain aggressive in raising interest rates for longer.

Some investors had expected that US CPI report would show an easing in inflation in August and provide a path for the Fed to moderate its policy tightening.

Investors sold a net US$13.11 billion of global equity funds after withdrawing a net US$23.02 billion in the previous week, data from Refinitiv Lipper showed.

Also weighing on sentiment was the risk of a global recession due to the simultaneous interest rate increases from major central banks, including the Fed, the European Central Bank and the Bank of England, to tame persistent inflation.

US and European equities funds faced outflows amounting a net US$10.52 billion and US$2.74 billion, respectively, but Asia obtained about US$740 million in inflows.

Among sector funds, tech, communication services and financials posted outflows worth US$1.15 billion, US$611 million, and US$350 million, respectively, but consumer staples lured US$1.38 billion in inflows.

Meanwhile, net selling in bond funds eased to a 4-week low of US$725 million.

Outflows from high yield bond funds saw a 96 per cent decline from a week ago to US$165 million, although net selling in short- and medium-term funds rose 29 per cent to US$1.48 billion.

However, government bond funds remained in demand for a third week with US$4.85 billion worth of inflows.

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Data showed money market funds had US$17.95 billion worth of net selling after posting a weekly inflow.

In the commodities space, energy funds received a marginal US$14 million in a second straight week of net buying, but precious metal funds were out of favour for a 12th week with US$794 million in outgo.

An analysis of 24,516 emerging market funds showed equity funds saw US$989 million worth of net selling, while bond funds lost US$1.35 billion in a fourth straight week of outflows. REUTERS