UPDATE 2-U.S.-based stock funds post biggest weekly outflow since July '12-Lipper
By Sam Forgione NEW YORK, Aug 22 (Reuters) - Investors in funds based in the United States pulled roughly $9.4 billion out of stock funds in the latest week, marking the biggest outflow from the funds since July 2012, data from Thomson Reuters Lipper service showed on Thursday. A large chunk of the outflows over the week ended Aug. 21 came from the SPDR S&P 500 ETF Trust. Investors withdrew $10.27 billion from the exchange-traded fund, which tracks the performance of the benchmark S&P 500 stock index. The index dropped 2.53 percent over the weekly reporting period as positive U.S. economic data reinforced concerns that the Federal Reserve will soon scale back its $85 billion in monthly bond purchases. "Fed actions are front-and-center," said Jeff Tjornehoj, head of Americas research at Lipper. "We had plenty of people trying to avoid the next selloff" in U.S. stocks, which could occur when the U.S. central bank announces a reduction in its bond-buying, he said. U.S. stock markets fell over the week partly on hesitation leading up to Aug. 21, when the Federal Open Market Committee, the U.S. central bank's policy-setting group, released the minutes of its July 30-31 meeting. The minutes offered few clues on the timing of a reduction in the Fed's bond-buying program [ID: nL2N0GM1EC]. Outflows from ETFs accounted for the total withdrawals from stock funds in the latest week. Investors withdrew $11.4 billion from stock ETFs, the most in nearly two years. Stock mutual funds, meanwhile, took in $2.05 billion, down modestly from inflows of $2.56 billion the prior week. The big outflows from stock ETFs led to the overall outflow of roughly $9.4 billion from stock funds, which also marked the first outflow from stock funds in eight weeks. ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor. Funds that hold European stocks attracted $1.08 billion in new cash, however, marking the biggest inflow to the funds in 10 weeks. The funds were popular even as the FTSEurofirst 300 index of top European shares fell 2.63 over the week. Investors have settled on the idea that European stocks' "worst days are behind them," Tjornehoj said in reference to signs that the euro zone debt crisis has improved. Data on Aug. 14 showed that the economies of Germany and France grew more quickly than expected in the second quarter, pulling the euro zone out of a 1-1/2 year recession . Funds that hold Japanese stocks, which had inflows for 28 straight weeks at the end of 2012 and into 2013, had their fourth straight week of outflows in the latest reporting period. Investors pulled $401.9 million from the funds, the most since early June. Tjornehoj of Lipper said investors may be losing faith in the Bank of Japan's stimulus program. The central bank announced in April that it would inject $1.4 trillion into the nation's economy in less than two years to fight deflation, fueling a rally in Japanese stocks. Investors also lost enthusiasm for bond funds, pulling $3.9 billion from taxable bond funds in the latest week as benchmark U.S. Treasury yields hit two-year highs. As yields rise, prices fall. The outflows reversed the prior week's inflows of $1.3 billion. The yield on the benchmark 10-year U.S. Treasury bond reached as high as 2.87 percent over the week as investors worried that the Fed will start scaling back its stimulus in September. The Fed's next policy meeting will be held on Sept. 17-18. The Fed is buying Treasuries and agency mortgages in an effort to spur hiring and keep interest rates low. The stimulus has been a major source of support for both stock and bond markets this year, with some analysts partly citing it as a reason for the S&P 500's rise of more than 16 percent this year. Both inflation-protected bond funds and riskier high-yield junk bond funds had the biggest outflows in eight weeks over the latest period. Inflation-protected bond funds, which hold bonds such as Treasury Inflation-Protected Securities or TIPS, had outflows of $499 million. Junk bond funds had outflows of $2.3 billion, showing another indication of investors' unwillingness to take risk in the latest week, Tjornehoj said. Funds that hold floating-rate bank loans still attracted $1.8 billion in the latest week, up modestly from the prior week's inflows. Investors have poured $45.5 billion into the funds this year. Floating-rate loans, also known as leveraged loans, are protected from rising interest rates by being pegged to floating-rate benchmarks. Fears of rising interest rates tied to a pullback in the Fed's easing have spurred much of the new demand for the funds. Commodities and precious metals funds, which mainly invest in gold futures, attracted small inflows of $98.7 million over the week. Those cash gains marked the second straight week of inflows into the funds after they had steady outflows from the start of April through early August. Gold rose to a near two-month high on Aug. 15 as a weaker dollar triggered short-covering and a technical breakout once prices breached key resistance at $1,350 an ounce. 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 -9.352 -0.27 3,427.600 10,358 Domestic Equities -12.289 -0.46 2,578.921 7,651 Non-Domestic Equities 2.936 0.34 848.679 2,707 All Taxable Bond Funds -3.910 -0.25 1,574.027 5,070 All Money Market Funds 10.717 0.46 2,363.709 1,340 All Municipal Bond Funds -2.141 -0.74 286.295 1,398
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