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Fund flows reflect uncertain outlook on risk-EPFR

HONG KONG, June 25 (Reuters) – China’s latest yuan policy shift triggered big flows into emerging market assets, but the risk of a second half global slowdown also caused investors to keep more cash, EPFR Global said in a report on Friday.

Of all the funds tracked by the firm, equity funds posted net outflows of $2.5 billion and bond funds took in $2.6 billion for the week ended June 23.

With only one week left in the first half, equity funds have posted inflows of $8.8 billion so far in 2010, compared with outflows of $26 billion for the same period in 2009.

Bond funds have absorbed more than three times as much as they did in the first 25 weeks of last year.

U.S. bond funds broke a 17-month string of inflows, with money instead headed to global and emerging market bond funds.

However, the week could not easily be characterised as a wholesale shift to risky assets, with money market funds absorbing $10.6 billion in fresh money .

During the period covered by EPFR’s latest data, the MSCI world equities index .MIWD00000PUS slipped 1 percent, the euro EUR= edged up 0.6 percent and the benchmark 10-year U.S. Treasury yield US10YT=RR slid 15 basis points.

EMERGING MARKET EQUITY FUNDS

The fund group absorbed $1.6 billion in the week, based on the view China’s de-pegging of the yuan opened opportunities for other emerging market exporters to gain market share.

China equity funds only took in $52 million for the week.

On the other hand, BRIC funds had best week of inflows since early March. Year-to-date inflows have risen to $772 million, less than half of the $1.75 billion taken in over the corresponding period last year.

Asia ex-Japan equity funds and Europe, Middle East & Africa funds had their second and third consecutive week of inflows, respectively.

DEVELOPED MARKET EQUITY FUNDS

Four of the five of the developed equity funds tracked by EPFR Global posted outflows in the latest week. Only Japan equity funds had inflows.

The global equity funds group, which has more than a third on average dedicated to Europe, suffered net redemptions of $976 million in the latest week.

SECTOR FUNDS

Only four of the nine sector funds tracked by EPFR posted inflows and, of those four, only the utilities sector took in more than $70 million.

Commodity sector funds had outflows for the second time in 14 weeks.

BOND FUNDS

This fund group reflected a greater appetite for risk more so than equity funds.

High yield and emerging market bond funds saw $1.1 billion and $637 million, respectively, in new money. That was the best week of inflows for high yield since early March.

Global bond funds had net inflows of more than $1 billion for the first time since the first week of May. (Reporting by Kevin Plumberg; Editing by Kazunori Takada)

GLOBAL MARKETS – World stocks rise after U.S. jobs data

European stocks rose, Wall Street was set for a firmer opening and government bonds slipped on Friday after closely-watched data showed the U.S. economy lost 663,000 jobs, not so far from the forecast.

The unemployment rate rose to 8.5 percent, its highest since 1983.

While the data highlighted the growing distress in the labour market, investors were relieved the economy did not lose more jobs than they feared.

“It gives the market a sense that we dodged a bullet in the very, very near term. It’s positive in that it wasn’t a blowout number of more than 750,000,” said Peter Kenny, managing director of Knight Equity Markets in Jersey City, New Jersey.

“All the indexes are higher because the market is breathing a sigh of relief because it wasn’t a blowout of market psychology. It indicates a slackening of the rate of decline and leaves the bear market rally intact.”

The MSCI world equity index was up a quarter percent. The FTSEurofirst 300 index rose 0.15 percent on the day, while emerging stocks were up 0.6 percent.

U.S. stock futures were pointing to a firmer open on Wall Street later.

Broad gains in the equity market come a day after Group of 20 leaders presented a united front to combat the financial crisis, sending risky assets higher.

At their London summit, G20 leaders pledged $1.1 trillion of additional funds to the International Monetary Fund and other institutions and to boost trade finance.

World stocks have risen more than 20 percent since hitting a 5-1/2 year low in March and investors are closely watching if the rally could be sustainable this time even with some consolidation.

“There is still a lot of volatility and I think these ambiguous ups and downs are typically what happens when the market is starting to turn around,” said Bernard McAlinden, strategist at NCB Stockbrokers.

“We had a good day yesterday. The G20 was less vague than probably the market had been expecting and the IMF deal will be good for European equities. There has also been a lot of mixed economic data.”

U.S. crude oil fell 1 percent to $52.16 after surging 9 percent on Thursday.

The June bund futures fell 42 ticks.

The dollar was steady against a basket of major currencies while the low-yielding yen lost 0.4 percent to 100.07 per dollar .

Fund flows reflect uncertain outlook on risk-EPFR

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