U.S.-based stock funds attract $5.4 bln in latest week - ICI

Wed Nov 27, 2013 1:32pm EST

NEW YORK, Nov 27 (Reuters) - Investors in U.S.-based mutual
funds committed $5.4 billion to stock funds in the latest week
on signals that the Federal Reserve would maintain its bond
buying for some time, data from the Investment Company Institute
showed on Wednesday. 
    The inflows in the week ended Nov. 20 marked the sixth
straight week in which investors have poured new cash into stock
funds, according to data from ICI, a U.S. mutual fund trade
organization. 
    Funds that mainly hold stocks of companies outside the U.S.
attracted $4.39 billion, marking the biggest weekly inflows into
those funds since February. Funds that mainly hold U.S. stocks,
meanwhile, attracted $1 billion, marking their weakest showing
in five weeks. 
    While U.S. stocks hit record highs over the weekly period,
global stocks outperformed. MSCI's world equity index
 rose 1 percent, while the Standard & Poor's 500
 stock index fell a slight 0.04 percent over the period in
response to dips later in the week.
    Fed Vice Chair Janet Yellen, who is President Barack Obama's
nominee to succeed Ben Bernanke as chairman of the Fed, defended
the U.S. central bank's steps to spur economic growth during a
Nov. 14 Senate hearing on her nomination.
    Yellen's comments lifted global stock markets, but U.S.
stocks retreated at the end of the reporting period after
minutes from a Fed policy meeting in October suggested it could
begin to scale back its $85 billion in monthly bond buying at
one of its "next few meetings."
    The Fed's stimulus has kept bond interest rates low, leading
investors to seek higher income in stocks and helping boost the
S&P 500 over 26 percent this year.
    Investors pulled $3.2 billion out of bond funds, marking the
eighth straight week of investor withdrawals. The latest
outflows were the smallest, however, in four weeks. 
    Hybrid funds, which can invest in stocks and fixed income
securities, attracted $1.4 billion in new cash over the latest
weekly period, down slightly from the previous week.
    Investors have poured billions into stock funds every month
this year through October to capitalize on the rally in U.S.
stocks while souring on bond funds in recent months on fears
over the Fed's next policy move, ICI data show. 
    In October, investors poured $21.1 billion into stock funds,
trouncing inflows of $2.6 billion in September and marking the
biggest monthly inflows since January, according to ICI data
released Tuesday.
    Funds that specialize in non-U.S. stocks attracted greater
demand with inflows of $13 billion over the month, while funds
that mainly hold U.S. stocks regained popularity with inflows of
$8.1 billion, marking their first inflows in three months. 
    The inflows into stock funds last month came ahead of the
Fed's decision to maintain the pace of its bond-buying program
on Oct. 30. 
    Bond funds had outflows of $15.6 billion in October, their
fifth straight month of investor withdrawals. Investors have
continued to pull cash out of bond funds in anticipation of a
spike higher in interest rates once the Fed begins scaling back
its bond-buying. 
    Recent polls by Reuters indicate a majority of economists
and financial market analysts do not expect a pullback to begin
until the first quarter of next year.
    The following table shows estimated ICI flows for the past
five weeks (all figures in millions of dollars):
                  10/23/13     10/30     11/6    11/13    11/20
 Total Equity       13,582     7,947    9,072    7,258    5,429
    Domestic         9,209     4,301    5,432    3,976    1,041
    World            4,373     3,646    3,640    3,283    4,388
 Hybrid*             2,391     2,084    1,394    1,476    1,436
 Total Bond         -2,386    -4,301   -4,260   -7,566   -3,235
    Taxable         -1,363    -3,514   -3,428   -6,432   -2,140
    Municipal       -1,023      -787     -833   -1,134   -1,094
 Total              13,588     5,730    6,206    1,168    3,631
 *Hybrid funds can invest in stocks and/or fixed income
securities.
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