UPDATE 2-Stock funds worldwide gain $19.7 bln inflow - EPFR
By Sam Forgione
NEW YORK, July 19 (Reuters) - Investors worldwide poured $19.7 billion into stock funds in the latest week as U.S. stocks hit record highs, fund-tracking firm EPFR Global said on Friday.
The inflows into all stock funds in the week ended July 17 were the largest in six months, said EPFR Global. Most of the new cash went into funds that hold U.S. stocks, which gained $16.96 billion, the most since June 2008.
The S&P 500 and Dow Jones industrial average hit record highs for three consecutive sessions at the start of the week on strong corporate earnings and hints that the Federal Reserve's stimulus is unlikely to slow soon. The S&P 500 rose 1.7 percent over the weekly period.
Fed Chairman Ben Bernanke boosted the appetite for stocks when he said on July 10 that the central bank needed to keep its bond buying in place given low inflation and a 7.6 percent unemployment rate that "if anything overstates the health of the labor market."
"The most recent remarks Bernanke made has made it very clear to everyone that they're not in a hurry to taper," said Richard Sichel, chief investment officer of Philadelphia Trust Co. He said Bernanke's comments likely helped drive demand for stock funds over the week.
Investors have poured $38 billion into stock funds so far in July, reversing $15.7 billion in outflows from the funds last month, EPFR Global said.
The Fed's $85 billion in monthly purchases of Treasuries and agency mortgage securities have been a major source of support for both stock and bond markets.
The stimulus has helped lift the S&P 500 over 18 percent this year. Investors fretted when Bernanke told Congress on May 22 that the Fed could reduce its bond buying later this year.
Bernanke's comments in late May caused a broad credit market selloff, and the yield on the benchmark 10-year U.S. Treasury has risen 87 basis points to 2.49 percent since May 2. As yields rise, prices fall.
Among international stock funds, Japanese equity funds gained $871 million in the latest week, while emerging market stock funds gained a meager $8 million. Japan's Nikkei average stock index rose 1.4 percent over the weekly period.
In the latest week, bond funds worldwide suffered outflows of just $670 million, the fund-tracker said. That marked an improvement from the previous week, when investors pulled $2.69 billion from the funds.
U.S. bond funds, however, saw inflows of $441 million over the weekly period, according to the Cambridge, Massachusetts-based EPFR Global.
Investors sought funds that hold riskier high-yield junk debt, which attracted $4 billion in new cash, their largest weekly inflow since October 2011, according to EPFR Global.
Funds that hold municipal bonds suffered outflows of $1.7 billion over the week, the most in three weeks according to the fund-tracker. Emerging market debt funds, meanwhile, had outflows of $1.3 billion, EPFR Global said.
Funds that hold Treasuries also suffered outflows of $1.1 billion, EPFR Global said, even as prices rose on the benchmark 10-year Treasury. The yield on the safe-haven bond fell 18 basis points to 2.49 percent over the reporting period. When yields fall, prices rise.
Funds that hold Treasury Inflation-Protected Securities or TIPS saw continued outflows of $357 million in the latest week after outflows of $256 million the previous week.
Floating-rate bank loan funds gained inflows of $1.8 billion, a record according to EPFR Global, which began tracking the funds in January 2007. Floating-rate loans are protected from rising interest rates by being pegged to floating-rate benchmarks.
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