June 15, 2017 / 11:50 PM / 5 months ago

U.S. stock ETF inflows balloon to largest of 2017: Lipper

NEW YORK (Reuters) - Investors raced into U.S.-based, stock exchange-traded funds this past week despite market jitters, delivering the most cash to those funds since late last year, Lipper data showed on Thursday.

Stock ETFs listed in the United States attracted $17.7 billion during the week ended June 14, according to the research service, while their mutual fund counterparts recorded $6.8 billion of outflows in their largest week of withdrawals since April.

Mutual funds are heavily favored by retail investors, while ETFs draw an increasingly diverse set of clients, including fast-trading hedge funds.

The result came as investors grappled with pressure on oil prices, soft economic data and an interest-rate hike by the U.S. Federal Reserve, the second rate hike this year.

“Mom and pop are easily scared: they’ve been hearing about the market meltdown, and it’s overvalued, and it’s time to sell, cash is your friend - stuff like that,” said Tom Roseen, head of research services at Thomson Reuters’ Lipper unit.

“On the flip side, there was really no reason for the meltdown.”

Taxable bond funds, an ostensibly safer alternative to stocks, managed to pull in $3.5 billion. Yet thanks to ETF buyers, domestic-focused stock funds pulled in $11.4 billion, the most since February.

The selloff was “overplayed,” said Roseen, adding that “some people saw it as a buying opportunity.”

A massive rotation out of technology shares, such as the so-called FANG stocks - Facebook Inc, Amazon.com Inc, Netflix Inc and Google-parent Alphabet Inc - and into beaten-down sectors, including financials, that began last Friday and resumed this week.

U.S.-based financial sector funds pulled in $2.3 billion, the most since November, as the Fed hiked rates in a boon for bank lending rates.

But technology sector stocks posted $444 million in withdrawals during the week, the most since September, according to the research service.

Tech stocks took over as the leaders of the ongoing stock rally as market segments popular in the immediate aftermath of U.S. President Donald Trump’s November election, such as financials and small-company stocks, faltered earlier this year.

Now by contrast, the Financial Select Sector SPDR Fund is on course to deliver higher one-month returns for June than the tech-heavy PowerShares QQQ ETF for the first time since February.

Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan

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