UPDATE 1-U.S.-based stock funds post $7.6 bln net outflows in week -Lipper

Thu Jul 24, 2014 6:08pm EDT

(Adds table, details, analyst quote)
    By Luciana Lopez
    NEW YORK, July 24 (Reuters) - Investors in U.S.-based funds
withdrew a net $7.6 billion from stock funds in the week ended
July 23, marking their biggest outflows since early February,
data from Thomson Reuters' Lipper service showed on Thursday.
    While mutual fund investors added a net $379 million to such
stock funds, exchange-traded funds posted outflows of $7.97
billion. ETFs are thought to represent the behavior of
institutional investors, while mutual funds are typically
purchased by retail investors.
    "I think the actions in the Middle East and Ukraine prompted
(ETF investors) to dive for cover," said Jeff Tjornehoj, head of
Americas research at Lipper.
    An early July air and sea barrage on the Gaza Strip by
Israel escalated into an invasion a week ago. 
    The Palestinian death toll in Gaza reached 762 on Thursday,
officials said. Israel has lost at least 32 soldiers in clashes
inside Gaza and with Hamas raiders who have slipped under the
fortified frontier in tunnels. 
    In addition, Malaysian Airlines flight MH17 was shot down by
a missile over eastern Ukraine last week, killing almost 300
people. The plane crashed in territory held by Russian-backed
separatists, raising fears the wreckage might be tampered with.
   
    Because mutual fund investors are often "set it and forget
it," Tjornehoj said, that is, holding assets for the long term,
those funds were less reactive.
    In coming weeks, he said, corporate earnings could become
the major driver for stocks. 
    The S&P 500 rose 0.27 percent from July 16 to July
23.
    Taxable bond funds attracted $2.78 billion in net inflows,
marking their biggest inflows since late May. 
    Riskier corporate high-yield bond funds posted $2.4 billion
in net outflows, marking their biggest outflows since June 2013.
    With spreads over investment-grade bonds tight, Tjornehoj
said, "We're probably watching the first cracks in the
high-yield market as investors come to expect better yields
before they buy back in."    
    Low-risk money market funds posted $5.19 billion in net
outflows, marking their second straight week of outflows.
        
 Sector                    Flow Chg  % Assets  Assets      Count
                           ($Bil)              ($Bil)      
 All Equity Funds          -7.590    -0.18     4,253.936   10,895
 Domestic Equities         -8.637    -0.28     3,141.591   7,930
 Non-Domestic Equities     1.047     0.09      1,112.344   2,965
 All Taxable Bond Funds    2.785     0.15      1,820.131   5,508
 All Money Market Funds    -5.187    -0.23     2,274.428   1,309
 All Municipal Bond Funds  0.686     0.24      293.572     1,429
 

 (Reporting by Luciana Lopez; Editing by Diane Craft and Lisa
Shumaker)