The Global Asset Fundflow Tracker - Investors Stay on the Sideline In Equities
Over the past week (12 - 18 May), investors stayed cautious among global equities (-US$5.7bn, broad-based geographically and by sector). Global equity funds have witnessed withdrawals for the past six weeks. In contrast, preference towards bonds remained intact. Global bond funds recorded a net inflow of US$2.8bn, the seventh straight weekly injection. While investors continued to switch out of government bonds into corporate bonds, the pace has slowed down remarkably lately. Within commodities, the US$1.5bn net inflow was once again led by buying into gold. Lastly, fairly little changes (-US$1.2bn) in overall fundflow terms within global money markets.
Global equity funds recorded their sixth consecutive weekly outflow, at a net US $5.7bn (see exhibit 1). The recent two weekly outflows appeared broad-based by region and by sector. European equities saw a net outflow of US$734mn and extended their selling streak to 12 weeks. However, the size of the most recent withdrawal has reduced significantly (the average amount of the outflow over the past 12 weeks was
US$1.9bn). UK, France and Germany witnessed more significant withdrawals. Our chief global equity strategist Sean Darby remained modestly Bearish on UK equity within global asset allocation in his recent note (see UK: Ambidextrous Drivers), citing the movement of sterling, amid the fears of Brexit, will influence 'domestic' share prices in the short-term.
In Asia, both mutual funds/ETFs (-US$174mn, the eighth weekly outflow) and foreign investors (-US$33mn) stayed sellers but reduced their equity selling sharply for the week.Japan witnessed foreign investors returning after two weeks of solid liquidation corresponded with the surprise announcement (no changes in policies) from the late April BOJ meeting. Furthermore, mutual fund/ETF investors appeared to have picked up their shares following sharp withdrawals in April. In Taiwan, president Tsai Ing-wen officially takes office today. Foreign investors have been significant sellers in the Taiwanese market for the past three weeks (latest: -US$852mn, past three weeks: -US $3.5bn), concerning the relationship between Taiwan and China.
US equities experienced their third weekly withdrawal, at a net US$4.8bn. Small caps, health care and the IT sectors witnessed largely selling lately. Year-todate, the health care and IT sectors have also been the two facing more sizable withdrawals among peers. The FOMC minutes released yesterday have raised consensus expectations of a June Fed rate hike quite substantially (Jefferies maintained its view rate hikes in June).
By asset class, investors have pulled out US$69bn from equities while unwound US$74bn from the money markets with bond markets attracting US$62bn injections (see RHS).