(Reuters) – Investors pulled money from global bond and equity funds in the week ended September 21, amid caution ahead of the US Federal Reserve’s meeting, which was expected to see further rate hikes curb rising inflation.
Investors exited $7.32 billion net in global bond funds, the largest weekly net sale since Aug. 31, data from Refinitiv Lipper showed.
GRAPH: Fund Flows: Global Equities, Bonds and Money Market https://fingfx.thomsonreuters.com/gfx/mkt/dwvkrxorjpm/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg
The Federal Reserve hiked interest rates by 75 basis points on Wednesday, the third such hike in a row, and officials are forecasting rates for this year at 4.4%, which is 100 basis points higher than what the Fed forecast three months ago.
“Sooner or later bond yields will peak, although this is difficult to plan for precisely. The market currently expects the US Fed Funds final rate to be reached around March-June 2023,” said Bimal Patel, senior fund manager at Canada Life Asset Management.
Global short- and intermediate-term bond funds saw the largest weekly outflow in 11 weeks of $4.98 billion net, while investors also withdrew $3.29 billion net from high-yield funds.
GRAPH: Global bond fund flows for the week ended September 21 https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnkqgovq/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20Sept%2021.jpg
Meanwhile, global equity funds saw $1.86 billion worth of disposals for the fifth straight week of net selling.
Financials and consumer staples lost $1.55 billion and $687 million in outflows, respectively, but utilities and technology both received about $300 million worth of inflows.
“Energy, Financials and Materials are still attractively valued relative to the rest of the US stock market. Valuation multiples for these companies remain low and they remain beneficiaries of the persistent inflation and rising interest rate environment,” said Eugene Barbaneagra , portfolio manager at SEI.
GRAPH: Fund Flows: Global Equity Sector Funds https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkrxkopx/Fund%20flows-%20Global%20equity%20sector%20funds.jpg
On the other hand, safer money market funds drew investor interest as they netted $28.23 billion, the largest weekly inflow since July 6.
Data for commodity funds showed that precious metals funds fell out of favor for the 13th week with $474 million in net disposals. Investors also exited $60 million in energy funds.
An analysis of 24,559 emerging market funds found investors sold $2.39 billion worth of equity funds, marking a 10th consecutive weekly outflow, while also exiting bond funds worth $2.78 billion.
GRAPH: Fund Flows: EM equities and bonds https://fingfx.thomsonreuters.com/gfx/mkt/xmpjoazoqvr/Fund%20flows-%20EM%20equities%20and%20bonds.jpg
(Report by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru)