| NEW YORK
NEW YORK Dec 7 Investors exited U.S. stock
funds after delving in the previous week and rotated into
non-U.S. stocks and high-yield bonds as U.S. lawmakers' talks
over a U.S. budget deal faltered, data from EPFR Global showed
Funds that hold U.S. stocks suffered outflows of $2.41
billion in the week ended Dec. 5 after gaining $10.52 billion in
new money the previous week, which was the most in roughly 16
months, according to the fund-tracking firm.
Stock funds worldwide attracted inflows of $2.3 billion, a
meager sum compared to massive inflows of $14.86 billion the
Some investors are exiting U.S. stock funds and taking
profits on uncertainty over a deal surrounding the "fiscal
cliff" of tax hikes and spending cuts in the U.S. and in
anticipation of increases in capital gains, said Douglas Gordon,
senior investment strategist for North America at Russell
"What markets really need to feel is that there's confidence
that a deal will get done in the early portion of 2013," Gordon
Investors opted for non-U.S. stocks and pumped $3.32 billion
into emerging market stock funds - the most in 10 weeks - and
$1.2 billion into European stock funds, the most in 11 weeks
according to the fund-tracker.
Gordon of Russell Investments said that emerging market
stocks are "modestly attractive" in value, especially given the
potential for China to improve its slowing growth.
Sentiment toward bond funds, meanwhile, was largely
unchanged from the previous week as investors gave $4.46 billion
to the funds worldwide, with U.S. bond funds accounting for
$2.06 billion of that total.
Investors took some risk in high-yield "junk" bond funds,
which attracted inflows of $1.73 billion, the most in 11 weeks
according to EPFR Global.
The benchmark S&P 500 index fell 0.33 percent over
the reporting period as President Barack Obama and Congress
remained at loggerheads over how to resolve the looming "fisal
cliff" of $600 billion in tax increases and spending cuts.
During the week, U.S. House Speaker John Boehner noted the
lack of progress in the talks, while President Obama said the
Republican proposal to solve the crisis was "out of balance."
On Wednesday, Obama predicted a deal could be reached within
a week if his opponents could compromise on raising taxes for
Americans who make more than $250,000 a year. If lawmakers don't
act, the tax increases and spending cuts set to occur early next
year could tip the U.S. into recession.
The yield on the safe-haven U.S. Treasury touched 1.59
percent on Wednesday, with some citing uncertainty over the
budget talks. The yield rose to 1.6267 percent in intraday
trading Friday after data showed that U.S. non-farm employment
increased by 146,000 jobs last month.
Shifting away from the U.S. crisis, investors also sought
value in emerging market bonds and committed $1.02 billion to
funds that hold them.
Flows into emerging market bond funds have been "on fire"
this year and should continue given low rates on U.S. Treasuries
and pessimism toward stocks as a result of the European debt
crisis, the U.S.' debt issues, and China's slowdown, said Robert
Abad, portfolio manager at Western Asset Management.