Global equity funds see jump in inflows despite inflation concerns


FILE PHOTO: Dividers are seen inside a trading post on the trading floor as preparations are made for the return to trading at the New York Stock Exchange (NYSE) in New York, U.S., May 22, 2020. REUTERS/Brendan McDermid

(Reuters) – Global equity funds witnessed higher inflows in the week ended Feb. 24, on optimism that global central banks would keep interest rates lower to prop up their economies, undeterred by rising inflation concerns.

Investors purchased $31.4 billion in global equity funds in the week ended Feb.24, which was 17% higher than last week, Lipper data showed.

On the other hand, global bond funds saw their lowest inflow in eight weeks on worries over higher inflation levels.

(Graphic: Fund flows into global equities, bonds and money markets: https://fingfx.thomsonreuters.com/gfx/mkt/xklpyojxypg/Fund%20flows%20into%20global%20equities%20bonds%20and%20money%20markets.jpg)

The bond funds had a net buying of $7.36 billion in the week ended Feb. 24, with money flowing mainly into inflation-protection bond funds and shorter-tenor bond funds.

Investors bought about $4.7 billion worth of funds that invest in U.S. short-term and medium-term bonds, while funds focused on bonds structured to provide protection against inflation, attracted about $1.5 billion, according to the data.

(Graphic: Global fund flows into equity sectors: https://fingfx.thomsonreuters.com/gfx/mkt/bdwvknqowpm/Global%20fund%20flows%20into%20equity%20sectors.jpg)

Among equities, tech funds had their lowest inflow in four weeks, hit by rising U.S. yields. Higher yields lower the present value of future cash flows of growth stocks, making them less attractive.

At the same time, financial sector funds saw their highest inflow in six weeks, boosted by higher yields as it benefits banks’ net interest margins.

(Graphic: Global bond inflows in the week ended Feb 24: https://fingfx.thomsonreuters.com/gfx/mkt/qmyvmwynmvr/Global%20bond%20inflows%20in%20the%20week%20ended%20Feb%2024.jpg)

Emerging market (EM) equities continued to face inflows as they saw a net buying of $2.8 billion in the week ended Feb.24, while emerging market bonds had outflows for the second consecutive week.

EM bonds had an outflow of $1.2 billion this week, Refinitiv data for 9,005 emerging market bond funds showed, after seeing net sales of $652 million in the last week.

 

(Graphic: Fund flows into EM equities and bonds: https://fingfx.thomsonreuters.com/gfx/mkt/qzjpqgdxrpx/Fund%20flows%20into%20EM%20equities%20and%20bonds.jpg)

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