NEW YORK Investors worldwide poured $7.5 billion into stock funds in the week ended March 5 on reassuring signs the U.S. economy was on firm footing and reduced geopolitical tensions, data from a Bank of America Merrill Lynch Global Research report showed Friday.
Inflows in the week ended Wednesday marked the fourth straight week of new cash into the funds, according to the report, which also cited data from fund tracker EPFR Global.
"People are growing sanguine about global growth," said Chris Konstantinos, head of international portfolio management at RiverFront Investment Group in Richmond, Virginia.
The net inflows into stock funds showed investors' conviction that stocks, which hit record highs over the weekly period, could continue to rally on a stronger U.S. economy.
The Standard & Poor's 500 stock index hit records and rose 1.6 percent over the weekly period on some strong U.S. economic data. It was also helped by comments from Federal Reserve Chair Janet Yellen that cold weather was behind recent weakness in the U.S. economy, and by reduced fears of armed conflict between Russian and Ukraine.
Meanwhile, investors pulled $3.8 billion from emerging market stock funds, extending those funds' record outflow streak to 19 weeks. Japanese stock funds posted $400 million in outflows, their first withdrawals this year.
MSCI's index of global emerging market stocks rose 0.3 percent over the period, despite being hit by the tensions in Russia and Ukraine. Japan's Nikkei average fell 0.5 percent over the period.
"The market is voting with its feet about the types of structural headwinds emerging markets face," said Konstantinos, adding the Fed's expected taper of asset purchases, and lower Chinese growth, are negative for emerging market stocks.
Funds that specialize in European stocks attracted $600 million, their smallest inflows in 16 weeks, but extending their inflow streak to 36 weeks.
The FTSEurofirst 300 index of top European shares fell 0.4 percent over the weekly period. Russia's intervention in Ukraine sent the index down 2.2 percent on March 3.
Investors pulled $1.8 billion from bond funds, their first outflows in five weeks, but they showed risk appetite by committing $1.9 billion to funds that specialize in high-yield junk bonds, marking the fourth straight week of inflows. High-yield corporate bonds have lower credit ratings than investment-grade bonds, and tend to attract inflows alongside other riskier assets such as stocks.
"When investors see the broader market perform well, it gives them confidence to take added risk," said Rick Meckler, president of LibertyView Capital Management in New Jersey.
Funds that mainly hold U.S. Treasuries posted $8.8 billion in outflows, mostly from the iShares 1-3 Year Treasury Bond ETF, the iShares 3-7 Year Treasury Bond ETF and the ProShares UltraShort 20- plus Year Treasury ETF.
Meckler said a limited set of investors likely caused the ETF outflows and the withdrawals did not represent broader bond investor sentiment.
Low-risk money market funds posted $16 billion in outflows, underscoring investors' willingness to put cash to work in riskier assets. The outflows from the funds, which typically invest in safe short-term securities, reversed inflows of $14.7 billion over the prior week, according to data from the report and from fund-tracker EPFR Global.
(Reporting by Sam Forgione; Editing by James Dalgleish and Nick Zieminski)