World investors continue to seek emerging market stocks -EPFR

Fri Jan 25, 2013 5:47pm EST

* Emerging market stock funds drew $4.17 bln in latest week

* Institutional investors pulled $1.28 bln from stock ETFs

By Sam Forgione

NEW YORK, Jan 25 (Reuters) - Investors pumped $5.65 billion into stock funds worldwide in the latest week, with most of the sum flowing into emerging market stock funds as investors exited U.S. exchange-traded funds, data from EPFR Global showed on Friday.

Funds that hold emerging market stocks captured $4.17 billion of the total sum into equity funds in the week ended January 23, while institutional investors pulled $1.28 billion out of U.S. stock ETFs, the fund-tracking firm said.

"There is more to be afraid of in the U.S. and Europe, superficially, than there is in the emerging markets," said Michael Jones, chief investment officer of RiverFront Investment Group. Jones emphasized lower debt levels in emerging market economies.

Retail investors, however, put $340 million into U.S. stock funds, the third straight week of commitments from mom-and-pop investors, EPFR Global added. This marks the longest streak of commitments from retail investors since February of 2011, the data firm said.

Investors worldwide have shown greater zeal for stocks this year. In the first full week of the year, $22.2 billion flowed into stock funds, which was the most since late September of 2007. Total inflows fell to $7.19 billion the following week, but remained substantial with the latest week's gains.

"I think the outlook for the overall economy looks fairly robust," said Anthony Conroy, head trader for BNY ConvergEx, an affiliate of the Bank of New York.

"Equities are underowned, and I think we're going to see that trend continue of inflows into equities out of bonds," he added.

Bond funds still attracted fans with inflows of $3.71 billion in the latest week. Funds that hold U.S. bonds gained $1.63 billion of that sum, while emerging market bond funds attracted $1.38 billion.

The benchmark S&P 500 rose 1.5 percent over the reporting period. Signals that Republican leaders would pass a nearly four-month extension of the U.S. debt ceiling, upbeat data on U.S. unemployment claims, and strong earnings from technology companies boosted sentiment.

The benchmark 10-year Treasury fell in price to yield 1.88 percent last Thursday after the positive unemployment report and strong results from a Spanish bond auction. The yield on the safe-haven bond rose to 1.95 percent on Friday on solid U.S. corporate earnings and news that European banks will repay more cash from crisis loans earlier than expected.

Funds that hold European bonds suffered $53 million in outflows over EPFR Global's weekly reporting period, while European stock funds had inflows of $573 million, modestly less than the prior week's gains of $840 million.

Appetite also cooled somewhat toward high-yield "junk" bond funds, which attracted $615 million, or just under half of the $1.12 billion in inflows the funds gained the prior week.

"The upside is not nearly as good as it has been," said Jones of RiverFront on high-yield bonds, with regard to their lower yields after swooning demand for the securities last year.

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