Investors stretch for yield and some safety-EPFR

NEW YORK, Aug 12 (BestGrowthStock) – Investors put cash to work in
emerging markets, both equity and debt, while also stashing
away funds for a rainy day in money market funds in the week
ended Aug. 11, according to fund-tracker EPFR Global.

The Cambridge, Massachusetts-based firm said growing doubts
about the U.S. and Chinese economic recoveries was a major
reason for developed equity market redemptions.

“Overall, investors channeled $4.46 billion into EPFR
Global-tracked bond funds, taking the year-to-date inflows over
the $135 billion mark, and steered another $5.1 billion into
Money Market Funds,” the firm said in a statement.

“Equity funds posted collective outflows of $1.7 billion
during the same period as redemptions from developed markets
funds more than offset flows into emerging markets funds,” EPFR
said.

Tuesday’s decision by the U.S. Federal Reserve to buy more
long-dated Treasuries, and leave interest rates unchanged in a
range between zero and 0.25 percent, is being viewed as a sign
the economy needs more help to pull out of its slump.

That has prompted developed equity markets to sell-off,
causing a near $4 billion net outflow of cash from U.S. equity
funds. Meanwhile, global emerging market equity funds pulled in
$1.64 billion in the latest week.

“Although the Fed’s willingness to loosen monetary policy
in order to prevent a double-dip recession provided some
reassurance, outflows from U.S. equity funds hit a five week
high with small cap blend and large cap growth funds the
hardest hit,” EPFR said.

One consequence of the uncertainty over the U.S. economy
and its low interest rates was the flight to safety trade that
keeps the Japanese yen stronger and hurts the outlook for
Japan’s exporters.

“Investors responded by pulling another $313 million out of
Japan Equity Funds, which have seen YTD inflows dwindle from a
peak of $3.7 billion in early May to just $323 million on
August 11,” EPFR said.

In other regions, Asia ex-Japan equities took in a net $546
million while EMEA equity funds had inflows of $140 million.

“Russia equity funds eked out another week of net inflows,”
the firm said.

Latin America equity funds had a four week inflow streak
snapped, brought lower in part by hard-hit Mexican funds.

Inflows were recorded in Indonesia. Prospects for further
U.S. monetary policy easing helped Hong Kong funds as the local
currency is pegged to the greenback, “keeping the spotlight on
property and other interest rate sensitive plays.”

Financial sector fund redemptions hit a seven-week high of
$410 million “as authorities around the world tightened their
regulatory frameworks.”

Redemptions were recorded in commodity, energy, technology,
healthcare/biotechnology funds while inflows were seen in real
estate, utilities and telecommunications.

BONDS BENEFIT

The prospects of continued low U.S. interest rates
attracted cash into high yield bond funds for a fifth
consecutive week, with inflows in excess of $800 million.

Emerging market bond funds took in $811 million, “lifting
YTD inflows to 230 percent of the full-year record set in
2005.”

U.S. bond funds YTD have had net inflows of $61 billion.
High yield bond funds had a fifth straight week of inflows in
excess of $800 million.

Balanced funds which invest in both bonds and equities had
outflows for the fifth week out of seven but YTD have taken in
a net $4.8 billion.
(Reporting by Daniel Bases; Editing by Bernard Orr)

Investors stretch for yield and some safety-EPFR