(Adds data for latest week, BofA numbers)
By Sujata Rao
LONDON, Oct 2 (Reuters) - Investors pulled a combined $75
billion from U.S. and emerging market equity funds in the third
quarter, wiping a record $10 trillion off the value of global
equities in the period, according to EPFR Global and Bank of
America Merrill Lynch.
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.
Funds pulled $35.2 billion from dedicated U.S. equity funds
over the quarter, according to EPFR, bringing year-to-date
outflows to $138 billion.
That along with September losses in European markets has led
to a $10 trillion drop in global equity market capitalisation,
the largest quarterly fall ever, BAML said.
Global equity market cap now stands at $60 trillion, a
two-year low, after peaking at $71 trillion in April, the bank
said.
The latest week saw global equity fund redemptions of $6.6
billion, the bank said in its weekly report, which also uses
EPFR figures. This coincides with a setback for European stocks
that have been hit by troubles at mining firm Glencore (LONDON:GLEN) and
German automaker Volkswagen (XETRA:VOWG).
European equities remain broadly in favour however.
Dedicated Europe funds saw tiny $20 million outflows in the past
week, but Q3 inflows amounted to $31.3 billion or 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
"Mutual fund investors continued to pin what faith they have
on markets and asset classes supported by robust quantitative
easing programs," EPFR said.
But fears of how the Volkswagen emissions scandal would
affect German companies led European flows to favour Italian and
Dutch equity funds towards the end of the third quarter, BNP
Paribas noted, citing EPFR.
European investment grade as well as junk-rated credit saw
bigger losses of $824 million and $617 million respectively in
the third quarter, partly as a result of these problems.
SHUNNING BONDS AND EMERGING MARKETS
Fears for China's economy deepened over the quarter as the
country suffered a huge equity plunge and devalued its currency,
while economic data in most emerging markets confirmed fears of
a protracted growth slowdown across the developing world.
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.
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.
Bond funds lost $7.4 billion in the past week, the biggest
outflow in five weeks, the BofA note said.
Meanwhile risk-shy investors pumped around $100 billion from
global and European money market funds over the quarter, EPFR
said.
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.
The lossmaking streak now extends for 12 straight weeks for
emerging equity funds, with $1.7 billion pulled out in the most
recent week, BAML said.
Emerging bond funds shed $15 billion in the third quarter,
versus $4.5 billion outflows in the first nine months of 2014.
They have seen redemptions for 10 straight weeks, with $1.4
billion pulled out this past week.
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 ID:nL5N120276
"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.
Net capital flows to emerging markets will be negative this
year for the first time since 1988, the Institute of
International Finance said on Thursday, highlighting the extent
of problems faced by the developing world ID:nL5N1212XO