UPDATE 2-U.S.-based stock funds attract $18.1 bln in latest week -Lipper
By Sam Forgione NEW YORK, Sept 19 (Reuters) - Investors in funds based in the United States poured $18.1 billion into stock funds in the latest week as global markets rallied on expectations the Federal Reserve would maintain its easy-money policies, data from Thomson Reuters' Lipper service showed on Thursday. The inflows into stock funds over the week ended Sept. 18 were the biggest since early January. Investors have committed nearly $31 billion to stock funds in the latest two weeks, marking the strongest two-week run for the funds since Lipper began tracking them in 1992. "The activity this week all reflected more of a risk-on attitude," said Jeff Tjornehoj, head of Americas research at Lipper. "We had a pretty good tone in equity markets." U.S. shares surged to record highs on Wednesday, the last day of Lipper's reporting period, after the Fed said it would maintain the pace of its $85 billion in monthly bond purchases and await more evidence of solid economic growth. The Standard & Poor's 500 stock index and the Dow Jones industrial average hit record highs on Sept. 18. Global equity markets also gained after former U.S. Treasury Secretary Lawrence Summers on Sunday withdrew from consideration to be the next Fed chairman. The MSCI world equity index rose 1.6 percent over the reporting period, while the S&P 500 index rose 2.2 percent for the week. Summers, a former top aide to President Barack Obama, was considered to be the front-runner to replace current Fed Chairman Ben Bernanke, whose second term expires in January. A potential Summers nomination was viewed as less favorable for the continuation of stimulus measures, which have helped boost the S&P 500 more than 20 percent this year. Stock exchange-traded funds attracted $15.5 billion of the total inflows into stock funds in the latest week, marking the biggest inflows into the funds since December 2008. The SPDR S&P 500 ETF Trust, which tracks the S&P 500 index, attracted $6 billion of the inflows. 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 emerging market stocks pulled in $2.14 billion in new cash over the week, down modestly from the prior week's inflows but still showing strong demand. Tjornehoj said investors sought emerging market stock funds, which benefit from the Fed's stimulus, on sentiment during the week that the Fed would maintain its easy-money policies. Japanese stock funds also attracted small inflows of $215 million, marking their second straight week of demand from investors. Japan's Nikkei average rose a modest 0.6 percent over the weekly period. The huge inflows into stock funds did not hinder demand for taxable bond funds, which attracted $1.4 billion over the weekly period, up slightly from the previous week's inflows and marking the biggest inflows into the funds in eight weeks. Selling pressure on bonds tempered over the week on expectations that the Fed would largely keep its bond-buying program in place. Yields on benchmark 10-year U.S. Treasury notes fell over the weekly period ahead of the Fed meeting, and plunged 17 basis points to 2.69 percent following the decision. As yields fall, prices rise. Riskier high-yield junk bond funds took in $1.4 billion in new cash, marking the biggest inflows into the funds in eight weeks. Junk bond funds are viewed by many investors as a comparable investment to stocks, and tend to attract new demand alongside stock funds. Funds that hold floating-rate bank loans, which are protected from rising interest rates by being pegged to floating-rate benchmarks, had another strong week with inflows of $1.3 billion. Investors have poured $50.7 billion into the funds this year on worries that a potential pullback in the Fed's bond-buying will cause interest rates to spike higher, which would hurt bond prices. The huge inflows into stock funds and modest inflows into bond funds weighed on demand for low-risk money market funds, which invest in short-term securities. The funds had small outflows of about $229 million over the period after attracting $13.2 billion in new cash the prior week. 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 18.075 0.51 3,642.363 10,318 Domestic Equities 12.764 0.48 2,718.678 7,608 Non-Domestic 5.311 0.59 923.685 2,710 Equities All Taxable Bond 1.378 0.09 1,599.339 5,117 Funds All Money Market -0.229 -0.01 2,357.392 1,326 Funds All Municipal Bond -1.102 -0.39 281.883 1,392 Funds
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