UPDATE 2-US-based stock funds have $7.3 bln outflow - Lipper

Thu Apr 25, 2013 7:45pm EDT

(Adds additional flows, context, analyst comment)
    By Sam Forgione
    NEW YORK, April 25 (Reuters) - Investors pulled $7.3 billion
out of U.S.-based stock funds in the latest week, the most since
July of last year even as U.S. stock markets recovered from a
sharp selloff, data from Thomson Reuters' Lipper Service showed
on Thursday.
    The big outflow was a result of investors pulling $8.4
billion out of stock exchange-traded funds in the week ended
April 24, also the most since July of last year. 
    The outflows from stock funds follow seven straight weeks of
cash gains into the funds. Those cash gains were largely driven
by rallies in the U.S. stock market. The benchmark S&P 500
 has risen over 11 percent this year as global stimulus
measures from the U.S. Federal Reserve and European Central Bank
have boosted markets. 
    Investors soured on ETFs that hold U.S. stocks and yanked
$7.8 billion from the funds, also the most since July of 2012,
after committing $95.7 million to the funds the previous week.
    "People realize how fragile the market is right now," said
Tom Roseen, head of research services at Lipper. "All we need is
a black swan event, and the house of cards is getting ready to
fall."
    All stock mutual funds reaped inflows of $1.07 billion over
the week, which offset the outflows in stock ETFs for a final
tally of negative $7.3 billion from all stock funds, Lipper
said.
    Mutual funds that hold only U.S. stocks, however, suffered
outflows of $171.6 million, which were the first weekly outflows
from the funds since mid-February.
    ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
    The significant outflows from ETFs come in the wake of Wall
Street's roller coaster ride on Tuesday, when a false tweet from
a trusted news organization sent the U.S. stock market into
freefall. 
    The 143-point fall in the Dow Jones industrial average
 came after hackers sent a message from the Twitter feed
of the Associated Press, saying the White House had been hit by
two explosions and that Barack Obama was injured. 
    The fake tweet, which was immediately corrected by
Associated Press employees, caused a sensation on Twitter and in
the stock market.
    Markets recovered from the sharp decline, however, amid
solid earnings from companies such as Google, Boeing
, and Netflix. A rise in the shares of Microsoft
Corp also lifted the S&P 500 and Nasdaq
Composite indexes after CNBC reported that activist
investor ValueAct Capital had taken a $2 billion stake in the
company. 
    The market recovery followed a sharp selloff in U.S. stock
markets the previous week amid disappointing U.S. economic data
and weaker-than-expected growth in China's economy.
    Among ETFs, investors pulled the most cash out of the SPDR
S&P 500 ETF, $2.8 billion, even as the index rose 1.73
percent over the reporting period. The Dow, meanwhile, rose 0.4
percent over the weekly period. 
    ETFs that hold emerging market stocks were also hit by
outflows of $976.6 million over the week, the most in four
weeks. The iShares: MSCI Emerging Markets fund sustained
outflows of $926.5 million, despite the MSCI's all-country world
equity index's rise of 2.1 percent over the period. 
    The SPDR Gold Trust sustained the second largest
outflows among ETFs of $1.92 billion. The outflows accounted for
a large chunk of total outflows of $2.26 billion from
commodities and precious metals funds. 
    The outflows from the funds, which are largely exposed to
physical gold, were the second highest on record after the prior
week's record outflow amid a dramatic selloff in gold prices. 
    Taxable bond funds, meanwhile, attracted inflows of $4.76
billion, the most in five weeks and up from $4.27 billion the
previous week. Investment-grade corporate bond funds raked in
$2.24 billion in new cash, the most in five weeks.
    Investors also put $520.8 million into riskier high-yield
"junk" bond funds, the most since early March and more than
doubling inflows of $241.8 million the previous week. 
    Roseen of Lipper said that, despite anticipation of a
short-term pullback in the market, investors are comfortable
with stocks over the long haul, leading to demand for high-yield
debt. High-yield bonds are perceived by some as a substitute for
stocks. 
    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          -7.315    -0.23   3,227.938   10,205
 Domestic Equities         -7.969    -0.34   2,394.886   7,553
 Non-Domestic Equities     0.654     0.08    833.052     2,652
 All Taxable Bond Funds    4.758     0.30    1,608.223   4,920
 All Money Market Funds    -4.365    -0.19   2,318.170   1,364
 All Municipal Bond Funds  -0.102    -0.03   326.391     1,377
 
 (Editing by Bob Burgdorfer)