By Sujata Rao
LONDON, Oct 2 (Reuters) - Investors, spooked by Chinese
economic turmoil and signs of weaker world growth, pulled a
combined $75 billion from U.S. and emerging market equity funds
in the third quarter while parking $100 billion in money market
vehicles, data showed.
In data released late on Thursday, Boston-based fund tracker
EPFR Global said European and Japanese funds were the only
equity classes to receive net inflows between July and
September, most likely motivated by the possibility of more
central bank money-printing.
"Mutual fund investors continued to pin what faith they have
on markets and asset classes supported by robust quantitative
easing programs," EPFR said.
While the U.S. Federal Reserve held off raising interest
rates in September it could move in December, despite the
increasingly fragile outlook for world growth, especially in
China and emerging economies.
Funds pulled $35.2 billion from dedicated U.S. equity funds,
according to EPFR.
European equities continued in favour however, taking $31.3
billion, already amounting to 190 percent of the full-year
record set in 2013. EPFR added also that Japan equity inflows of
$25 billion were the biggest quarterly figure since it started
tracking them at the start of 2002.
Japanese and European equities have absorbed $56.4 billion
and $104.5 billion year-to-date, well above last year's levels,
the data shows. U.S. outflows are running at $138 billion,
dwarfing the $32 billion received last year.
Within Europe, investors appeared worried by the impact of
the Volkswagen (XETRA:VOWG) emissions scandal on German companies. Data
showed big flows directed towards Italian and Dutch equity funds
towards the end of the third quarter, BNP Paribas (PARIS:BNPP) noted, citing
the data.
The Volkswagen and Glencore (LONDON:GLEN) scares prompted investors to
pull out cash from European equities over the past week, albeit
only $19 million.
Over the third quarter, European investment grade as well as
junk-rated credit saw bigger losses of $824 million and $617
million respectively as a result of these problems.
SHUNNING BONDS AND EMERGING MARKETS
Bond funds of all stripes saw outflows in the third quarter.
Global bond funds lost $16.9 billion while U.S. and European
debt shed $8.9 billion and $2.8 billion respectively.
"During a quarter marked by a sharp correction in China's
equity markets and persistent fear that the (Fed) would make
good on its stated desire to start normalizing interest rates
investors steered clear of most fixed income fund groups," the
report said.
Global and European money market funds took in around $100
billion over the quarter from risk-shy investors.
Emerging equities and bonds extended their run of losses on
signs the developing world is headed for a protracted period of
weakness or even crisis in the case of China and Brazil.
The EM equity exodus accelerated during the quarter, with
outflows of $39.7 billion bringing year-to-date losses to $59.8
billion. The biggest losses were in Asia which saw outflows of
over $20 billion.
Emerging bond funds shed $15 billion in the third quarter,
versus $4.5 billion outflows in the first nine months of 2014.
Allocations to Brazil in emerging equity funds were on the
brink of falling below 7 percent for the first time in more than
a decade, EPFR noted, amid fears of a currency and political
crisis in the country.
Brazil's bonds, equities and currency are among this year's
worst performers.
"Latin America's largest economy currently offers investors
a toxic mixture of stalled growth, political gridlock, soft
demand for commodities, above-target inflation and sliding
credit ratings," EPFR said.