Investors buy stocks, dump debt on tax deal: EPFR

NEW YORK Fri Dec 10, 2010 3:32pm EST

Leanne Chase poses for a portrait with a chart of the Dow Jones Stock Market on her laptop computer screen at her home in Boston, Massachusetts November 18, 2010. REUTERS/Brian Snyder

Leanne Chase poses for a portrait with a chart of the Dow Jones Stock Market on her laptop computer screen at her home in Boston, Massachusetts November 18, 2010.

Credit: Reuters/Brian Snyder

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NEW YORK (Reuters) - A tax deal between the White House and opposition Republican lawmakers pushed investors to load up on equities while nearly eschewing bonds in the week ended December 8, fund-tracker EPFR Global said on Friday.

The compromise deal, which still awaits Congressional approval, would extend all Bush-era tax cuts for two years.

For the week, investors put a collective $13.71 billion net new cash into equity funds, with $3.1 billion going into emerging markets. Bond funds narrowly avoided a third week of outflows, with a net $146 million of fresh cash.

The tax deal helped global equity funds to take in "just shy of $2 billion, making it the best week for this fund group since late January 2007."

Money market funds hit a 22-week high of $32.5 billion.

"This week's tepid bond fund inflows highlight the recent shift toward equities," said Brad Durham, global managing director at EPFR.

Emerging market equity funds took in more cash, raising the year-to-date levels to fresh records just shy of $90 billion, EPFR said.

However, China equity funds had outflows that snapped a five-week inflow streak as investors expect more monetary tightening to take place. Greater China equity funds had outflows for the first time since early September.

"EMEA (Europe, Middle East, Africa) equity funds extended their current inflow streak to 13 straight weeks as year-to-date inflows into Russia and Africa regional equity funds climbed to $2.89 billion and $1.08 billion respectively," the statement said, noting the strong influence of rising commodity prices helping fuel the increase.

Latin America equity funds had inflows for the 16th week out of the last 17 weeks.

Separately, commodity sector funds had net inflows that pushed the year-to-date total over the $26 billion mark while energy funds had inflows for a fifth consecutive week.

Financial sector funds snapped a two-week outflow streak.

"Y-T-D flows into all sector funds now stand at $37.35 billion with commodity sector funds accounting for 70 percent of the total, real estate sector funds 18 percent and energy sector funds 8 percent," the statement said.

BOND FUNDS

U.S. bond funds had redemptions of more than $1 billion in the latest week while emerging market bond funds, especially hard currency funds, suffered outflows for a third week.

The outflow from U.S. bond funds came primarily with intermediate-term mandates of 5 to 8 years. The momentum of net cash outflows from municipal bonds funds slowed.

Outflow momentum from western European bond funds also slowed as German funds took in net cash. However the redemption streak for the sector hit eight weeks.

EPFR, a subsidiary of British media group Informa Plc, tracks funds domiciled globally with some $14 trillion in total assets.

(Reporting by Daniel Bases; Editing by James Dalgleish)

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