August 23, 2018 / 11:22 PM / a month ago

UPDATE 1-U.S. fund investors hike China exposure despite trade strife

 (Recasts; adds data on funds, quote, byline, table)
    By Trevor Hunnicutt
    NEW YORK, Aug 23 (Reuters) - U.S. fund investors apparently
saw a buying opportunity in China despite ongoing trade
tensions, adding their most exposure to that market since
January, Lipper data for the latest week showed on Thursday.
    Investors bought $572 million shares in U.S.-based funds
that invest primarily in Chinese equities during the week ended
Wednesday, according to the research service.
    U.S. and Chinese officials ended two days of talks on
Thursday with no major breakthrough as the bilateral trade war
escalated with the activation of another round of dueling
tariffs on $16 billion worth of each country's goods.

    Yet investors are expecting Beijing to continue
counteracting the effects of the dispute with increasingly
relaxed monetary and fiscal policies.
    China last week reported downbeat economic data, but rolled
out a $14 billion urban railway plan and pushed local
governments to speed up issuance of special bonds for the
funding of infrastructure projects.
    "They're continuing to do more and more," said Komson
Silapachai, vice president of research and portfolio strategy at
Sage Advisory Services Ltd. "We just think that China has
reversed course."
    But there were still some signs of risk aversion in the
market. Money market funds, where investors park cash, collected
$4.2 billion during the weekly period, after investors pulled
out $2.2 billion the week before, Lipper said.
    U.S.-based energy sector mutual funds and exchange-traded
funds (ETFs) posted $701 million in withdrawals during the week,
the most pulled from those funds since September 2016, the data
showed.
    The S&P 500 energy sector has fallen 3.7 percent
over the past three months, including dividends, following oil
prices lower. Crude prices have been hurt by worries about the
global economic growth outlook given trade tensions.
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
    
 Sector                    Flow Chg  Pct of    Assets     Count
                           ($ blns)  Assets    ($ blns)   
 All Equity Funds          1.754     0.02      7,563.917  12,331
 Domestic Equities         1.432     0.03      5,367.069  8,752
 Non-Domestic Equities     0.322     0.02      2,196.848  3,579
 All Taxable Bond Funds    3.405     0.12      2,828.646  6,096
 All Money Market Funds    4.208     0.15      2,735.166  1,038
 All Municipal Bond Funds  0.378     0.09      439.907    1,455
 
 (Reporting by Trevor Hunnicutt; editing by Jennifer Ablan, G
Crosse)
  
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