US leads record $30.6bn outflow from global stock funds - Financial Times

9/2/2018

US leads record $30.6bn outflow from global stock funds

Weekly figures show pullouts in US, Europe and Asia offset by emerging market inflows

Adam Samson in London

Investors yanked a record $30.6bn from global equities funds this week, with the US facing particularly heavy withdrawals amid an intense bout of volatility on Wall Street.

Outflows from US stock funds totalled $34bn in the five trading days to Wednesday, according to EPFR data compiled by Jefferies. Funds holding stocks from developed European countries also faced significant withdrawals of $3.4bn, while foreign investors pulled $7.7bn from Asia Pacific funds.

“Investors turned heavy sellers in equities,” said Kenneth Chan, strategist at Jefferies, who added that the outflow marked an abrupt turnround from January in which global equities funds posted record inflows.

Emerging markets fared well this week, however, drawing $2.1bn in inflows.

The data include the start of the week, which saw the S&P 500 take on Monday its heaviest fall since 2011.

The sell-off began with worries over a pick-up in inflation causing a rapid rise in bond yields. It intensified after a record spike in a key measure of volatility caused severe pain in strategies that bet against just that, causing the collapse of at least two exchange-traded products.

The issues at the so-called inverse-vol funds are thought to have ignited broader ructions that are likely being exaggerated by algorithmic trading, according to several strategists.

The weekly figures from EPFR do not cover the tumultuous trading session on Thursday. The S&P 500 ended the day down 3.8 per cent, leaving America’s main stock gauge in correction territory, defined as a 10 per cent fall from a recent high.

Analysts have noted that the volatility may continue for some time, particularly given the unusually tame run-up in US stocks in 2017.

“The trading pattern suggests that markets may now be susceptible to both fundamental and technical factors but most importantly uncertainty that could keep volatility elevated and leave us in a choppier trading pattern than we have seen in some time,” Goldman Sachs said in a note.