Global investors pull back from equity funds amid inflation concerns

April 12 – Global investors dumped equity funds for the second consecutive week in the week ended April 10, amid persistent inflation worries and diminishing expectations for a US Federal Reserve rate cut in June.

Economic data released on Wednesday showed US consumer prices increased more than expected in March, casting further doubt on whether the Federal Reserve will start cutting interest rates in June.

Global equity funds saw an outflow of USD 2.9 billion during the week, with US and Asian equity funds witnessing outflows worth USD 2.7 billion and USD 1.9 billion respectively.

On the other hand, European equity funds collected an inflow of USD 891 million.

Among sectoral funds, investors withdrew a net USD 708 million out of the technology sector, breaking a 12-week-long buying trend.

By contrast, global equity funds had a robust inflow of USD 60 billion in the first quarter of the year, driven by investor anticipation of Federal Reserve rate cuts, enhancing the appeal of riskier global equities.

Meanwhile, global bond funds attracted strong inflows, amassing USD 12.8 billion over the week, spurred by dampened expectations for a US rate cut in the near term.

Mark Haefele, chief investment officer of UBS Global Wealth Management, revised his outlook anticipating the Fed could lower rates by 50 basis points starting in September instead of June.

“With US Treasury 10-year yields at 4.55% by Wednesday’s US equity close, we view now as an attractive time to lock in yields. We retain our preference for quality bonds,” he said.

Medium-term US dollar bonds saw robust inflows of USD 2 billion, while government short-term US dollar bonds garnered USD 1.3 billion. Loan participation funds secured USD 686.6 million, while US dollar municipal funds raised USD 505 million.

On the other hand, US dollar corporate bond funds experienced outflows totaling USD 1 billion, and global high-yield dollar bond funds saw a reduction of USD 473 million.

Global money market funds experienced a USD 3 billion outflow, following a mammoth USD 105 billion worth of inflow in the previous week.

In the commodities market, investors sold off precious metal funds worth USD 524 million, reversing from USD 691 million in net purchases the previous week. Energy funds, on the other hand, saw a net outflow of USD 76 million.

Data from 29,583 emerging market (EM) funds revealed a decline in purchases of EM bond funds, with investors buying just USD 597 million compared to USD 1.67 billion the previous week. Additionally, they sold USD 1.7 billion in EM equity funds during the week ending April 10, the largest amount in five weeks.

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Sonali Paul)