LONDON, Feb 5 (Reuters) - The flow of investor funds out of world stocks extended to its longest run in four years last week, but is still short of levels typically associated with previous recessions or bear markets, Bank of America Merrill Lynch said on Friday.
Emerging market outflows painted a similar picture of “slow bleed, not capitulation”, but another heavy inflow of cash into government and Treasury bonds suggested investors were becoming increasingly worried about deflation, the U.S. bank said.
Rising concern over global growth and central banks’ ability to respond effectively have rocked financial markets since the turn of the year, slamming stocks and oil and boosting safe-haven assets like cash and government bonds.
Investors pulled a “chunky” $9.9 billion out of equity funds in the week to Wednesday, Feb. 3, according to BAML, which also uses data from fund research house EPFR Global.
The outflow was entirely driven by $10.2 billion of withdrawals from U.S. equity funds, the eighth outflow in the past nine weeks, while European equity funds drew in $1.5 billion, the 17th inflow in the past 18 weeks.
That brought the total outflow over the past five weeks, the longest run of redemptions in four years, to a net $34 billion, or 0.5 percent of assets under management, BAML said.
That’s similar to the $36 billion outflow around the market sell-off in August last year, but still well short of the $90 billion outflow around the U.S. debt ceiling crisis of August 2011, the $85 billion around the 2008 crisis and $65 billion redemptions in the 2002 bear market decline, BAML said.
“Equity outflows are thus far consistent with ‘healthy correction’ rather than recession/bear market,” the bank’s investment strategists said in a note on Friday.
Government bond and Treasury funds pulled in $2.4 billion, the fifth straight weekly inflow, but this was balanced by a $2.2 billion outflow from investment grade bond funds, the largest in six weeks.
As expectations of higher U.S. interest rates faded, investors poured $700 million into gold funds, the fourth weekly inflow in a row and bringing the total over that period up to $2.3 billion, BAML said.
Emerging market debt funds posted a $700 million outflow and equity funds a “modest” $800 million outflow. (Reporting by Jamie McGeever; Editing by Toby Chopra)