August 30, 2013 / 3:25 PM / 6 years ago

UPDATE 1-Investors pull $2 bln out of emerging market bond funds

By Sam Forgione

NEW YORK, Aug 30 (Reuters) - Investors worldwide pulled $2 billion out of emerging market debt funds in the latest week, the 14th straight week of outflows and the biggest withdrawals since June, a Bank of America Merrill Lynch Global Research report said on Friday.

Uncertainty about whether the United States will conduct military action against Syria hit emerging market assets in the week, ended Aug. 28. Those assets had already been hit by an expected reduction in the U.S. Federal Reserve’s economic stimulus program.

Bond funds worldwide had outflows of $7.2 billion in the latest week, the fifth straight week of outflows and little changed from withdrawals of $7.4 billion in the previous week.

Outflows from bond funds were largely unchanged even as the yield on benchmark 10-year U.S. Treasury notes fell from a two-year high of nearly 2.9 percent on Aug. 21.

Funds that hold government securities, which mainly hold U.S. Treasuries, had outflows of $1.9 billion, the eighth straight week of withdrawals.

Funds that hold Treasury Inflation Protected Securities, or TIPS, had outflows of $300 million, the 20th straight week of outflows, according to the report, which also cited data from fund-tracker EPFR Global.

Investors remained wary of riskier high-yield junk bond funds and withdrew $900 million from the funds, following withdrawals in the prior week of $2.7 billion, the biggest outflows since late June.

U.S. stock funds had $3.1 billion in outflows, compared with withdrawals in the prior week of $14.3 billion, the highest since June 2008. All stock funds worldwide had outflows of $4.8 billion, with $4 billion of that total being pulled out of exchange-traded funds.

The benchmark S&P 500 index fell 0.5 percent in the latest week as concerns over a possible U.S.-led military strike on Syria hit world stock markets.

Like their bond counterparts, emerging market stock funds had big outflows of $4 billion in the latest week, the largest withdrawals in nine weeks. The MSCI world equity index fell 0.74 percent over the reporting period.

Investors put $1.3 billion into funds that hold European stocks in the latest week, the ninth straight week of inflows into the funds, even as the FTSEurofirst index of top European shares fell 0.76 percent.

Japanese stock funds had small inflows of $200 million, reversing outflows of $300 million in the previous week. Japan’s Nikkei average dropped 0.64 percent in the latest week.

Investors put $500 million into commodities funds, which mainly invest in physical gold, the biggest inflows in 31 weeks.

Gold hit a 3-1/2 month peak above $1,430 an ounce on Aug. 28 as investors sought safety amid concerns over Syria.

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