Investors brush aside Russia concerns to pile into risk assets - BAML

LONDON (Reuters) - Investors brushed aside concern over military and economic tensions between the United States and Russia to pump as much as $7 billion into equities over the past week, Bank of America Merrill Lynch strategists said on Friday.

This included $2.8 billion of inflows into emerging market equities, according to the BAML note, which cited EPFR data.

While Russian assets have tanked this week after the U.S. announced a fresh set of sanctions on Russian companies and individuals, there has been no sign of contagion in the emerging markets sector, according to the strategists.

The sell-off in Russian, Turkish and Iranian assets has so far been offset by resilient Chinese currency flows, they said.

This means there was $2.8 billion of inflows into emerging markets equities and smaller inflows of $600 million into EM debt. “Weak U.S. dollar means gold fund inflows and emerging market resilience,” the BAML strategists said.

The greenback has fallen 1 percent against the Japanese yen this week, and is down over 5 percent so far this year. JPY=

Overall investors have now pumped $119 billion into equities this year so far, while the bond inflows bring the year-to-date number to $54 billion.


However, there have been some signs of caution in other areas. Inflows of $3.4 billion into U.S. Treasuries this week mean money is flowing into U.S. government bonds at a record pace of $18.6 billion year-to-date.

“Global synchronised recovery, record profits, low unemployment, massive fiscal stimulus, Fed selling, $70 oil ... yet 10-year USTs still unable to break 3 percent,” the analysts wrote, suggesting this means yields could move even lower.

As much as $1.1 billion also flowed into safe-haven gold, which means $7 billion has now been driven into funds investing in the precious metal since the start of the year.

Meanwhile, investors shed European equities at the fastest pace since July 2016, with $5.2 billion leaving the continent’s shores.

Reporting by Abhinav Ramnarayan, Editing by Helen Reid and Mark Heinrich