Equities suffer heavy outflows

Equities suffered heavy outflows last week, when investors took refuge in the safety of bonds, according to two reports.

Bank of America Merrill Lynch says investment flows have been favouring “safe” yield rather than “any” yield, over the past few weeks.

Equities flows

Equities have been falling out of favour. Source: Bank of America Merrill Lynch

So far this year, the flows into high-grade (investment grade) corporate bonds and government bonds have been around $65 billion while those into high-yield debt and equity funds have been $22 billion.

In the week ended October 8, high-yield debt saw outflows of $1.2 billion while $1.7 billion was pulled out of equity funds, according to Bank of America Merrill Lynch data looking at European-domiciled funds.

Investment-grade debt saw inflows of $1.5 billion; $1.9 billion went into government debt.

The bulk of flows went into the highly-liquid, safe money market funds. Inflows into money market funds increased by 2.4% last week from the previous one, to $25.5 billion. The total year-to-date is nearly $60 billion.

Commodities saw outflows of $402 million. Emerging markets debt saw meagre inflows of just $610 million, but still 0.2% higher than in the previous week.

A report into the flows of capital by RBS also shows investors preferred bonds to equities in the past week.

Equities lose out to debt

The RBS analysts note that the inflows into emerging markets debt in the week that ended October 8 improved.

Emerging markets bonds flows

Emerging markets bonds flows. Source: RBS

Emerging markets fixed income funds saw inflows amounting to 0.24% of assets under management (AUM), compared with outflows worth around 0.15% of AUM in the previous week.

Latin America was the main beneficiary of inflows into emerging markets debt, followed by emerging Europe, which saw its biggest inflow in 10 weeks. Emerging Asian debt had its eight consecutive week of inflows.

By contrast, emerging market equities saw outflows all around. Latin America was the worst hit.

In developed markets debt, North America led the inflows, with its largest inflow since February.

In developed markets equities, Europe led the way for outflows. It has seen six weeks of outflows so far, losing a cumulative 0.64% of AUM, the RBS analysts noted. Asian stocks saw their biggest outflow since December 2011.

@AntoniaOprita