Global equity funds see big outflows as rate outlook shifts

Jan 19 – Global equity funds witnessed hefty outflows in the week up to Jan. 17 as investors trimmed positions after central bankers in the US and Europe pushed back against market expectations of an early interest rate cut.

Investors pulled a net USD 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 US 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 US and European equity funds saw net selling of USD 9.23 billion and USD 1.48 billion, respectively. Conversely, Asia funds attracted about USD 1.72 billion, the second successive week of inflows.

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

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

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

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

At the same time, investors exited about USD 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 USD 181 million when compared with about USD 805 million of net disposals in the previous week. Meanwhile, energy funds faced outflows of USD 209 million.

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

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