Cautious investors trim equity holdings before inflation data, Fed meet

Jan 26 – Global investors reduced their holdings in equity funds in the week leading up to Jan. 24, exercising caution before a pivotal inflation report due on Friday and a meeting of the US Federal Reserve next week, which could reshape expectations about the pace and extent of interest-rate cuts.

Despite this, a surge in global stocks limited fund outflows, spurred by optimism after strong quarterly results from Netflix and bullish forecasts from semiconductor companies, including Taiwan’s TSMC and Super Micro Computer.

According to data from LSEG, global equity funds experienced USD 2.19 billion in net outflows during the week, marking the smallest weekly outflow in four weeks.

Investors sold US and European funds of about USD 3.04 billion and USD 2.12 billion, respectively, on a net basis. Conversely, Asian funds drew a net USD 2.35 billion in buying as inflows extended to a third successive week.

The tech sector gained USD 2.47 billion amid optimism over upbeat forecasts, the biggest inflow since Nov. 22, 2023. The healthcare and energy sectors, meanwhile, saw USD 552 million and USD 593 million worth of net selling, respectively.

Debt funds attracted increased interest, with global bond funds registering USD 9.34 billion in inflows, marking the fifth consecutive week of positive inflows.

Short-term global bond funds received USD 5.29 billion, the largest inflow since Oct. 11, 2023. High-yield funds saw net purchases of USD 880 million.

Concurrently, investors pulled a net USD 18.27 billion out of money market funds, staying net sellers for a second successive week.

In the commodities segment, precious metal funds attracted USD 209 million, their first weekly inflow in four weeks. Energy funds also saw about USD 54 million worth of net buying.

Data covering 27,956 emerging market funds showed investors offloaded a net USD 2.83 billion worth of equity funds during the week, the biggest net selling in five weeks. Bond funds also witnessed net selling, worth about USD 790 million.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Pooja Desai)