LONDON: Investors pulled a record amount of money out of global equity funds in the week to Aug 26, according to Bank of America Merrill Lynch, a measure of the alarm that China’s markets and economy have aroused around the world.

The $29.5 billion outflow, including $19bn in just one day, was the largest since the series began in 2002, surpassing any weekly outflow engendered by the collapse of Lehman Brothers in 2008.

Stock mutual funds posted $24bn in outflows, while stock exchange-traded funds bled $6bn, according to the report. The $19bn outflow on Aug 25 was the second largest daily outflow since 2007 when comparable daily flow data became available, BAML said in a note Friday.

Worries over the health of China’s economy and Beijing’s struggle to contain the market upheaval since it devalued the yuan earlier in August sent Chinese stocks into a tailspin that pulled down global markets.

The rebound was sharp — oil, for example, rose 10 per cent on Thursday alone. But the BAML figures, in part based on weekly flows from data-provider EPFR Global, are for the week to Wednesday Aug 26.

Emerging market equity funds were hit hard. Investors withdrew a net $10.5bn, the largest outflow since January 2008, BAML said. Funds that specialize in US shares posted $12.3bn in outflows, their biggest in 16 weeks, while Japanese stock funds found fans with $3.3bn in inflows.

Low-risk money market funds attracted a hefty $22bn, while precious metals funds raked in $1.1bn, the most since January.

This tallied with a separate report from the Institute of International Finance, showing the largest outflow from emerging market stocks since the mid-2013 “Taper Tantrum” when the US Federal Reserve signalled it might be about to raise interest rates but then quickly backed down.

Investors pulled a net $8.7bn out of EM stocks this month, the IIF report said. “Emerging market investors have been spooked by rising uncertainty about China,” said Charles Collyns, chief economist at the IIF.

On Monday, Aug 24, the seven emerging markets that provide daily flows data experienced outflows of $2.7bn, as much as on Sept 17, 2008, during the week of the Lehman Brothers bankruptcy, the IIF said.

In developed markets, European stocks posted a $3.6bn outflow in the week to Aug 26, the first outflow in 15 weeks and the biggest since October last year, BAML said.

In fixed income, $11.7bn left bond funds, the largest since June 2013. Emerging market bond funds also had their biggest outflow since June 2013, BAML said, while high-yield bond funds posted their biggest weekly outflows so far this year at $4.9bn.

So far this year, emerging market equities have shed $48.4bn and developed market equities have attracted $48.9bn, according to BAML.—Reuters

Published in Dawn, August 29th, 2015

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