There was an interesting split in the direction of mutual fund flows last week with bond funds suffering an outflow of USD 7.5bn, the third week of significant outflows. In contrast, equity funds attracted inflows of USD 4.8bn according to the EPFR weekly reported dataset. US domiciled funds, European funds and Japanese funds all attracted inflows, while GEM continued to experience outflows according to data compiled by Mark Diver of Nomura (further details below).
Composite Mutual Fund Flows Based Indicator Rose
Our global composite mutual flows based indicator rose last week for the first time in five weeks but at 0.46 standard deviations reflects neutral sentiment. It should be noted that the weekly fund flow data captures flows in the week to Wednesday and will therefore not capture any investor reaction to yesterday’s spike in equity and bond market volatility.
US equity mutual funds attracted inflows last week of USD 4.7bn, the first positive inflow in three weeks, according to AMG Lipper weekly reported data. Consequently, our US flows based indicator rose to +0.77 standard deviations, signalling moderately bullish sentiment, in our view.
European equity mutual fund investors made net purchases last week of USD 0.3bn, the second consecutive week of small positive inflows and maintaining the pattern of the past six weeks, which have been characterised by insignificant flows. This lack of conviction from European equity fund investors has resulted in our indicator moving recently within a fairly tight neutral sentiment range. Last week it moved marginally higher to read +0.04 standard deviations.
GEM Equity Fund Investors Engaged In Net Sales
GEM equity fund investors engaged in significant net selling for the fourth consecutive week to the tune of USD 1.73bn and making a fourweek cumulative net outflow of over USD 10bn. Our GEM mutual flows based sentiment indicator fell further into bearish territory to -1.65 standard deviations, its most bearish reading since April 2011. Dedicated regional Asia ex Japan funds had outflows of USD 1.2bn last week, LatAm funds had net redemptions of USD 0.5bn and emerging EMEA fund investors purchased a net USD 0.03bn.
Investor’s appetite for Japanese equity mutual funds continued unabated with a further net inflow last week of USD 0.65bn. Interestingly, both Japanese domestic and foreign domiciled funds attracted net inflows last week. Although consistently positive, the magnitude of inflows into Japanese equity mutual funds has been slowing over the past four weeks. Therefore, our flows based Japanese indicator has been slowly easing and last week dropped below two standard deviation but is still in the region that we would regard as very bullish.