Investor concern about tightening lending conditions in China and deteriorating finances in Greece and Japan led them to pull cash out of developed market equity funds for debt funds in the week ended Jan. 27, fund tracker EPFR Global said late on Thursday.
"Overall, investors pulled over $9 billion out of EPFR Global-tracked equity funds while committing $4.8 billion to all bond funds tracked. Bond funds have now received net inflows every week since March 11, 2009," EPFR said in a statement released late on Thursday.
However, safe haven money market funds still proved too conservative for investors, leading to a $10 billion outflow from this sector, bringing the year-to-date total to $70.1 billion.
Emerging market equities suffered outflows while bond funds had inflows, particularly local currency-denominated funds, which took in an all-time inflow record of $515 million.
U.S. equity funds recorded their biggest weekly outflow since late June, 2008, the Boston-based firm said.
"The earnings season did not work the same magic for U.S. equity funds as dour forecasts combined with soft macroeconomic data and fresh uncertainty about the direction of key reform proposals prompted investors to pull over $8 billion out of this fund group," EPFR said.
But a safety trade led to U.S. bond funds getting a net inflow of $2.4 billion, marking 56 consecutive weeks of inflows.
European equity funds suffered net redemptions for the third time in five weeks.
"Mixed earnings reports and fresh doubts about the health of banks in several countries kept the pressure on Europe equity funds, with redemptions hitting a five-week high of $731 million," the firm said.
Mounting concerns over Greece's fiscal position has unnerved investors.
The euro zone nation has estimated it will need to borrow about 53 billion euros this year to plug fiscal shortfalls and refinance its debt.
This week it raised 8 billion euros with a five-year bond issue, but was forced to offer a very high yield.
In Japan's case, a warning shot from Standard & Poor's added to global financial market uncertainty. The firm threatened on Jan. 26 to cut the credit rating of the world's second largest economy unless it produced a credible plan to rein in its debt and lift growth in an economy plagued by persistent deflation.
Equity funds tied to Brazil, Russia, India and China, collectively had net redemptions for the first time since early September. However, just as sentiment has turned negative toward China, China equity funds saw their first inflows since mid-December.
In the case of Chinese equity funds, they took in a net $288 million as investors took the moves by authorities to tighten lending conditions as a positive sign the government is moving to stop an asset bubble from growing.
"The possibility of weaker-than-expected Chinese and U.S. demand also weighed on Latin America Equity Funds, which posted collective outflows of $222 million for the week, while Taiwan Equity Funds — which were also hit by concerns about the outlook for the tech sector — suffered their worst week in flow terms since late August," the firm said.
Emerging markets bond funds posted inflows of $572 million.
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