By Sam Forgione
NEW YORK, Oct 31 (Reuters) - Investors in funds based in the
United States poured $11.8 billion into stock funds in the
latest week on expectations the Federal Reserve would stick with
its current bond-buying program, data from Thomson Reuters'
Lipper service showed on Thursday.
"There is a lot of uncertainty gone," said Jeff Tjornehoj,
head of Americas research at Lipper."People feel confident that
bond-buying will keep asset prices elevated," he said.
The new demand in the week ended Oct. 30 marked the third
straight week of big inflows into stock funds. U.S. stocks have
surged to record highs within the past two weeks on bets that
the Fed would maintain its $85 billion in monthly bond-buying at
its October meeting.
In line with expectations, the central bank extended its
bond-buying support on Wednesday, but issued a slightly
less-dovish-than-expected statement, leading to a dip in global
markets and Treasury bond prices.
The Fed dropped a reference to a "tightening of financial
conditions observed in recent months" from its list of risks to
the outlook and removed a mention of concern over higher
mortgage rates, which have fallen since the last meeting.
Despite the stock market dip at the end of the week, funds
that hold U.S. stocks attracted $8 billion as the Standard &
Poor's 500 index rallied 1 percent over the weekly
Funds that hold international stocks, meanwhile, attracted
about $3.5 billion, marking the eighth straight week of new cash
into the funds. MSCI's world equity index rose
0.7 percent over the weekly period.
Funds that hold emerging market stocks attracted $1.2
billion in new cash, marking their biggest inflows in five
weeks. MSCI's emerging market equities index rose 0.9
percent over the period.
Emerging market assets have benefited from the Fed's easy
money policies. Tjornehoj said the demand stemmed from the
expectations of continued Fed stimulus.
Investors pulled about $60 million out of Japanese stock
funds, however, reversing inflows of $373 million the previous
week. Japan's Nikkei stock average suffered its biggest
one-day loss in 2-1/2 months on Oct. 25, hit by the yen's
strength against the dollar.
Money market funds attracted $7.7 billion in new cash, down
from massive inflows of $43.8 billion in the previous week.
Institutional investors poured $14.1 billion into the funds,
while retail investors withdrew nearly $6.4 billion.
Tjornehoj said that institutional investors may have still
parked cash in the funds on a looming suspicion that the U.S.
stock market has hit a peak. The S&P 500 index has risen over 23
percent this year.
Investors had poured cash into the funds, which hold
low-risk assets such as short-dated government bonds, over the
previous week after the threat of a U.S. debt default faded.
Taxable bond funds also reaped $1.3 billion in inflows, down
from the previous week's inflows of $3.1 billion but still
marking two consecutive weeks of demand following three prior
weeks of outflows.
Investors gave $752.7 million to high-yield junk bond funds,
marking the eighth straight week of demand for the funds. The
funds tend to attract new cash alongside stock funds since they
are viewed as riskier than other debt classes.
"There wasn't much to be excited about with the economy, and
strangely enough that was good news for bonds," Tjornehoj said.
Weak U.S. jobs data on Oct. 22 have fueled speculation that the
Fed would keep its accommodative monetary policy in place.
The yield on the benchmark 10-year U.S. Treasury rose just 4
basis points over the period and ended the week at 2.53 percent.
That marked only a modest change from the prior week, when the
yield fell to 2.47 percent, its lowest in three months. Bond
yields move inversely to their prices.
Commodities and precious metals funds, which mainly invest
in gold futures, had outflows of $296 million, marking the fifth
straight week of withdrawals from the funds. The SPDR Gold Trust
ETF had the biggest withdrawals of $274.6 million.
The price of spot gold flattened late in the week. Gold
was up less than 0.1 percent at $1,344.56 an ounce at the
close of trading on Oct. 30.
The weekly Lipper fund flow data is compiled from reports
issued by U.S.-domiciled mutual funds and exchange-traded funds.
The following is a broad breakdown of the flows for the
week, including exchange-traded funds (in $ billions):
Sector Flow Chg % Assets Count
($Bil) Assets ($Bil)
All Equity Funds 11.767 0.32 3,747.512 10,341
Domestic Equities 7.998 0.29 2,782.543 7,629
Non-Domestic Equities 3.769 0.39 964.969 2,712
All Taxable Bond Funds 1.302 0.08 1,624.785 5,151
All Money Market Funds 7.665 0.33 2,352.683 1,285
All Municipal Bond -0.503 -0.18 281.469 1,402