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UPDATE 2-U.S.-based stock funds gain $11.84 bln, most since Jan. -Lipper
July 12, 2013 / 12:30 AM / 4 years ago

UPDATE 2-U.S.-based stock funds gain $11.84 bln, most since Jan. -Lipper

By Sam Forgione
    NEW YORK, July 11 (Reuters) - Investors in funds based in
the United States poured $11.84 billion into stock funds in the
latest week, the most since late January, as investors overcame
fears of a pullback in the Federal Reserve's stimulus, data from
Thomson Reuters' Lipper service showed on Thursday.
    Funds that hold only U.S. stocks accounted for most of the
gains in the week ended July 10 and attracted $10.74 billion,
the most since September 2011. Volatility fell over the week as
U.S. investors were less rattled by the prospect of the Fed
cutting its bond-buying later this year.
    Along with diminished concerns of a pullback in the Fed's
stimulus, strong U.S. jobs data and optimism heading into the
corporate earnings season boosted the benchmark S&P 500 
2.3 percent over the week. 
    "It was time for people to rationalize their fears and move
forward," said Jeff Tjornehoj, head of Americas research at
Lipper, on the inflows into stock funds.
    He was referring to investors who had avoided stock funds in
response to fears that the Fed could reduce its stimulus later
this year. Fed Chairman Ben Bernanke told Congress on May 22
that the central bank could reduce its stimulus later this year
if the U.S. economy looked strong enough. 
    The Fed is buying $85 billion each month in Treasuries and
agency mortgages in an effort to spur hiring and lower long-term
borrowing costs. The stimulus has been a major support for both
bond and equity markets. 
    Exchange-traded funds that hold U.S. stocks took in $8.4
billion, the biggest inflows into the funds since September
2012. The SPDR S&P 500 ETF gained $5.52 billion in new
cash.
    Mutual funds that hold U.S. stocks, meanwhile, attracted
$2.34 billion, the most since the first week of the year. 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 dividend-paying stocks were a bright spot and
gained $471.35 million in new cash, the most in nine weeks. 
    Funds that hold emerging market stocks suffered relatively
small outflows of $102.5 million over the weekly period,
reversing the prior week's inflows of $1.65 billion, despite the
MSCI world equity index's rise of 2.07 percent
over the period.
    Tjornehoj of Lipper said that investors favored U.S. stocks
for the safety of the United States relative to stocks in
regions such as Europe and Brazil, which face greater economic
uncertainty.
    Funds that hold non-U.S. stocks still managed to attract
$1.1 billion over the week, although that sum was half of the
prior week's inflows. Japanese stock funds attracted $556.3
million, the most in seven weeks as Japan's Nikkei average rose
2.6 percent.
    Funds that hold taxable bonds suffered outflows of $236.9
million in the week ended July 10 after gaining $3.32 billion in
inflows the previous week. Investment-grade corporate bond funds
attracted a modest $272.9 million, while riskier high-yield junk
bond funds attracted a meager $12 million.
    Municipal bond funds suffered $1.2 billion in outflows,
modestly greater than the prior week's outflows but a drop from
record investor withdrawals of $4.5 billion in late June.
    "We still have higher interest rates, and I think that has
spooked your bond fund investor," said Tjornehoj of Lipper.
    While demand for stocks showed diminished fears of a Fed
pullback, the yield on the benchmark 10-year U.S. Treasury still
rose 17 basis points over the week. The safe-haven bond's yield
has risen 95 basis points since May 2 on fears that the Fed
could reduce its bond-buying. As yields rise, prices fall. 
    Investors also pulled $250.3 million from funds that hold
inflation-protected bonds, marking the 13th consecutive week of
withdrawals from those funds. Tjornehoj of Lipper said there are
no signs of looming inflation in the U.S. economy.
    Money market funds, which are low-risk vehicles that invest
in short-term securities, gained $22.9 billion over the week,
the most since the start of the year. Institutional investors
committed nearly all of the new cash to the funds, said
Tjornehoj of Lipper.
    Investors pulled $998.8 million from commodities and
precious metals funds, which mainly invest in gold futures. The
outflows were more severe than the previous week, when investors
withdrew $92.6 million. 
    The price of spot gold rose 1 percent over the week,
however, as investors saw value in the commodity following price
declines in late June.
    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          11.845    0.36    3,372.967   10,282
 Domestic Equities         10.738    0.43    2,554.589   7,577
 Non-Domestic Equities     1.107     0.14    818.378     2,705
 All Taxable Bond Funds    -0.237    -0.02   1,572.982   5,003
 All Money Market Funds    22.870    0.99    2,343.995   1,353
 All Municipal Bond Funds  -1.201    -0.39   300.932     1,399

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