June 13, 2014 / 5:06 PM / in 3 years

UPDATE 1-Stock funds worldwide attract $11.4 bln over week -BofA

(Adds additional fund flow data, analyst comments)

By Sam Forgione

NEW YORK, June 13 (Reuters) - Fund investors worldwide poured $11.4 billion into stock funds in the week ended June 11, marking the biggest inflows into the funds since February after the European Central Bank unveiled new stimulus measures, data from a Bank of America Merrill Lynch Global Research report showed on Friday.

The inflows came after the ECB cut interest rates to record lows last Thursday, which lifted equities on both sides of the Atlantic to record highs. Strong U.S. jobs data also boosted investors’ confidence in stocks, while bond funds attracted just $1.6 billion in inflows.

“Investors who may have backed away a little from the market looked to get back in,” said Richard Sichel, who oversees $2 billion as chief investment officer of Philadelphia Trust Co. The inflows into stock funds in the latest week reversed the prior week’s outflows of $2 billion.

Funds that specialize in European stocks attracted $2.6 billion, marking their biggest inflows in 16 weeks, according to the report, which also cited data from fund-tracker EPFR Global. U.S.-focused stock funds raked in $5.1 billion after attracting just $1.2 billion the prior week.

The benchmark S&P 500 stock index rose 0.83 percent over the week-long period ending Wednesday.

Emerging market equity funds attracted $2.3 billion in new cash, marking their biggest inflows in nine weeks. Japanese stock funds posted $900 million in outflows, meanwhile, marking their biggest outflows in 13 weeks.

“Investors are developing a new interest in emerging markets,” said Alan Gayle, director of asset allocation at RidgeWorth Investments in Atlanta, Georgia. “The strength in the developed markets obviously has a positive effect on the emerging market economies.”

The latest strong U.S. data came when the Commerce Department’s non-farm payrolls report last week showed a solid pace of hiring in May, returning employment to its pre-crisis level.

The inflows into bond funds marked their weakest demand in three months, according to the report.

St. Louis Federal Reserve Bank president James Bullard said Monday that encouraging U.S. economic data could prompt him to move forward his view on when rates should be raised. That renewed focus on the risk of higher interest rates, or yields, which move in inverse relationship to bond prices.

Floating-rate debt funds posted $1.3 billion in outflows, marking their biggest withdrawals since August 2011. The funds, which are protected from rising interest rates, posted outflows despite the concerns of an earlier than expected Fed interest rate hike.

The preference for stocks over bonds showed in inflows of just $200 million into riskier high-yield bond funds, which marked their lowest inflows in eight weeks. Some investors have noted excessive prices on the bonds.

Precious metals funds posted $300 million in outflows, marking their second straight week of outflows. On June 5, spot gold fell toward a five-month low near $1,240 an ounce.

Reporting by Sam Forgione; Editing by Chizu Nomiyama and W Simon

Our Standards:The Thomson Reuters Trust Principles.
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