NEW YORK (Reuters) - Fund investors worldwide poured $13.4 billion into stock funds in the week ended February 19 on confidence that stocks could head higher, data from a Bank of America Merrill Lynch Global Research report showed on Friday.
The inflows into stock funds in the week were the biggest in 12 weeks, according to the report, which also cited data from fund-tracker EPFR Global. Investors pulled $45 billion out of money market funds, meanwhile, marking their biggest outflows since last October.
The inflows marked the third straight week of new demand for stock funds. Funds that specialize in U.S. stocks attracted $8.3 billion of the net inflows into stock funds, with most of the cash flowing into exchange-traded funds. ETFs are thought to represent the behavior of institutional investors.
The inflows into stock funds and outflows from money market funds, which typically invest in safe short-term securities, underscored investors’ appetite for risk in the latest week and confidence that stock markets could gain in the near-term.
“The expected return from stocks is positive over the next 12 months,” said Robert Stein, global head of asset management at Astor Asset Management in Chicago.
The benchmark Standard & Poor’s 500 stock index rose 0.5 percent over the weekly period. Stocks rose during most of the week after investors blamed weak U.S. retail sales and homebuilder confidence data on frigid weather.
“The data was not the type of weak U.S. economic data that would change the path for equities in the long run,” Stein of Astor Asset Management said.
He said investors viewed the worst to be over in stock markets. The S&P 500 stock index fell nearly 3 percent between January 30-February 3 on mixed U.S. economic data and concerns of a protracted capital flight out of emerging markets.
The latest weekly gain in U.S. stocks came despite a dip in stock markets on Wednesday after the minutes from the U.S. Federal Reserve’s most recent meeting showed members supported continued tapering of the central bank’s bond-buying program. U.S. markets were closed Monday for Presidents Day.
Investors continued to favor funds that hold European stocks, which attracted $4.5 billion in new cash, marking their 34th straight week of inflows. The FTSEurofirst 300 index of top European shares rose 0.9 percent over the weekly period.
Investors still showed an aversion to emerging market stocks and pulled $1.5 billion out of emerging market stock funds, extending the funds’ record outflow streak to 17 weeks. The outflows came despite a modest 0.6 percent rise in MSCI’s global emerging market stocks index.
While stock funds attracted the most new cash, bond funds attracted $2.6 billion, marking their third straight week of inflows and showing some investors’ preference for safety.
Still, investors’ risk appetite resulted in inflows of $2.4 billion into funds that specialize in riskier high-yield junk bonds, marking their biggest inflows in 17 weeks.
“Investors are looking for income and there has been good performance in high-yield,” said Brian Rehling, chief fixed income strategist at Wells Fargo Advisors in St. Louis.
The Barclays U.S. Corporate High Yield index has gained 1.9 percent so far this year, beating the benchmark Barclays U.S. Aggregate bond index’s gain of 1.41 percent.
The yield on the safe-haven 10-year U.S. Treasury note fell 3 basis points to 2.73 percent over the weekly period in response to the weak U.S. economic data. Bond yields move inversely to their prices.
Reporting by Sam Forgione; Editing by Chizu Nomiyama