NEW YORK Investors worldwide withdrew large sums of cash from emerging market funds in the latest week on lingering uncertainty over the U.S. Federal Reserve's plans for unwinding its bond-buying, data from a Bank of America Merrill Lynch Global Research report showed on Friday.
Investors pulled $4.7 billion out of emerging market stock funds in the week ended November 13, marking the biggest outflows from the funds in 20 weeks, according to the report, which also cited data from fund-tracking firm EPFR Global.
Emerging market bond funds had outflows of $1.8 billion, their biggest outflows in 10 weeks. Investors have withdrawn cash from the funds in 24 of the past 25 weeks, data from the report showed.
"We're generally bearish on emerging markets," said Chris Konstantinos, director of international portfolio management at RiverFront Investment Group.
"You're going to see the fortunes of those markets and those currencies ebb and flow depending on what the current view is on U.S. interest rates," Konstantinos said.
Emerging market assets have benefited from the Fed's $85 billion in monthly purchases of Treasuries and agency mortgages. The stimulus has kept interest rates low, leading investors to seek higher risk and profit in emerging market assets.
MSCI's global emerging market equities index .MSCIEF sank 3.6 percent in the latest week. Despite Tuesday's comments from regional Fed presidents Dennis Lockhart and Narayana Kocherlakota urging an accommodative Fed policy, uncertainty remained over whether the Fed will pull back its bond-buying in December.
Stock funds overall attracted meager inflows of $200 million, reversing outflows of $1.8 billion over the previous week. Funds that hold U.S. stocks attracted $2.2 billion, reversing the prior week's outflows of $7.5 billion.
The Standard & Poor's 500 .SPX stock index rose 0.7 percent over the reporting period on strong U.S. data on third-quarter gross domestic product growth and an unexpected surge in job growth in October.
Konstantinos of RiverFront said that investors overseas likely put cash into U.S. stock funds in a year-end push to participate in this year's 25.6 percent rise in the S&P 500 index. The Fed's easy money policies have lifted the index to record highs this year.
Investors pulled $2.7 billion from bond funds overall during the weekly period, reversing inflows of $1.7 billion the previous week. The prior week's inflows marked the strongest demand for the funds in six weeks.
Investors have pulled $85 billion from bond funds worldwide since the start of June, according to the report from Bank of America Merrill Lynch. Investors have grown fearful of bonds since the Fed signaled in May that it could reduce its bond purchases.
The yield on the benchmark 10-year U.S. Treasury index rose about eight basis points to 2.72 percent over the latest week on the prospects of a Fed tapering. As yields rise, prices fall.
(Reporting by Sam Forgione; Editing by James Dalgleish)