MUMBAI: The US government may well be arguing furiously over the details of a record-setting rescue package for its financial sector, but the country still remains, for many investors, the safest option in an uncertain world.
US Equity Funds recorded net inflows for the 11th time in 13 weeks in late September, in spite of their relatively modest gains compared to the major emerging markets fund groups, according to data by Emerging markets Portfolio Funds Research (EPFR).
The bulk of the new money flowed into US Large Cap Blend and US Sector Funds and, for the first time in five weeks, growth oriented funds outperformed their value peers.
According to EPFR, for the week ending September 24, investors pulled another $9.5 bn out of bond and equity funds geared to emerging and global markets, committed $10 bn to US Equity Funds and returned $11 bn to money market funds. Several sector funds also attracted significant flows, some of which went to establishing short positions in major exchange traded funds (ETFs), and Japan equity funds posted inflows for the first time in nine weeks.
At the country and sub-regional level China equity funds attracted strong inflows and Russia equity funds took in fresh money for the second straight week despite the fragile state of investor sentiment for both markets. But Emerging Europe and BRICS (Brazil, Russia, India and China) equity funds extended their losing streaks to 16 and eight weeks respectively and investors pulled significant sums out of India, Turkey and Switzerland Equity Funds.
Asia (excluding Japan) funds turned in a 4.9% gain for the week and benefited from the over $900 mn that flowed into China equity funds. But redemptions from other regional and country sub-groups, including $293 mn from India equity funds, offset those inflows. India is currently suffering from a vicious circle where capital outflows weaken the currency, adding to inflationary pressures and the risk of further growth-sapping interest rate hikes.
Japan equity funds recorded net inflows for the first time since mid-July. Sentiment was also helped by the swift selection of a replacement for Yasuo Fuduka, the former prime minister. His successor, Taro Aso, will outline some of his economic policy goals for the country’s sluggish economy in a speech to Japan’s parliament on Monday.
Europe Equity Funds, meanwhile, extended their losing run to eight weeks and $4.7 bn as the European Central Bank reiterated its determination to cap inflationary pressures and expectations before shifting to an easing bias.
The inflation rate in August was still close to double its target ceiling despite slowing regional growth that has already seen Ireland fall into a technical recession, or two consecutive quarters of negative growth.
Among the other funds groups, Global, Latin America and EMEA Equity Funds had their worst weeks since late January despite turning in generally good performance numbers while Europe Equity Funds posted their eighth straight week of outflows. Redemptions from both Global Bond and Balanced Funds exceeded $1.5 bn.
Latin America Equity Funds posted outflows for the 16th consecutive week as three of the four major EPFR Global-tracked emerging markets equity fund groups suffered net redemptions during the week ending September 24. The exception was the Global Emerging Markets (GEM) Equity Funds, which recorded inflows for the first time in nine weeks.
Source:
US still the safest option for equity investments- Markets-The Sunday ET-Features-The Economic Times
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