Developed market funds suffer investor redemptions

By Daniel Bases

NEW YORK, Jan 28 (BestGrowthStock) – Investor concern about
tightening lending conditions in China and deteriorating
finances in Greece and Japan led them to pull cash out of
developed market equity funds for debt funds in the week ended
Jan. 27, fund tracker EPFR Global said late on Thursday.

“Overall, investors pulled over $9 billion out of EPFR
Global-tracked equity funds while committing $4.8 billion to
all bond funds tracked. Bond funds have now received net
inflows every week since March 11, 2009,” EPFR said in a
statement released late on Thursday.

However, safe haven money market funds still proved too
conservative for investors, leading to a $10 billion outflow
from this sector, bringing the year-to-date total to $70.1
billion.

Emerging market equities suffered outflows while bond funds
had inflows, particularly local currency-denominated funds,
which took in an all-time inflow record of $515 million.

U.S. equity funds recorded their biggest weekly outflow
since late June, 2008, the Boston-based firm said.

“The earnings season did not work the same magic for U.S.
equity funds as dour forecasts combined with soft macroeconomic
data and fresh uncertainty about the direction of key reform
proposals prompted investors to pull over $8 billion out of
this fund group,” EPFR said.

But a safety trade led to U.S. bond funds getting a net
inflow of $2.4 billion, marking 56 consecutive weeks of
inflows.

European equity funds suffered net redemptions for the
third time in five weeks.

“Mixed earnings reports and fresh doubts about the health
of banks in several countries kept the pressure on Europe
equity funds, with redemptions hitting a five-week high of $731
million,” the firm said.

Mounting concerns over Greece’s fiscal position has
unnerved investors. The euro zone nation has estimated it will
need to borrow about 53 billion euros this year to plug fiscal
shortfalls and refinance its debt.

This week it raised 8 billion euros with a five-year bond
issue, but was forced to offer a very high yield.

In Japan’s case, a warning shot from Standard & Poor’s
added to global financial market uncertainty. The firm
threatened on Jan. 26 to cut the credit rating of the world’s
second largest economy unless it produced a credible plan to
rein in its debt and lift growth in an economy plagued by
persistent deflation.

EMERGING MARKETS

Equity funds tied to Brazil, Russia, India and China,
collectively had net redemptions for the first time since early
September. However, just as sentiment has turned negative
toward China, China equity funds saw their first inflows since
mid-December.

In the case of Chinese equity funds, they took in a net
$288 million as investors took the moves by authorities to
tighten lending conditions as a positive sign the government is
moving to stop an asset bubble from growing.

“The possibility of weaker-than-expected Chinese and U.S.
demand also weighed on Latin America Equity Funds, which posted
collective outflows of $222 million for the week, while Taiwan
Equity Funds – which were also hit by concerns about the
outlook for the tech sector — suffered their worst week in
flow terms since late August,” the firm said.

Emerging markets bond funds posted inflows of $572
million.

Investment Analysis
(Reporting by Daniel Bases; editing by Carol Bishopric)

Developed market funds suffer investor redemptions