LONDON, Oct 2 (Reuters) - Investors, spooked by Chinese economic turmoil and signs of weaker world growth, pulled a combined $75 billion from U.S. and emerging market equity funds in the third quarter while parking $100 billion in money market vehicles, data showed.
In data released late on Thursday, Boston-based fund tracker EPFR Global said European and Japanese funds were the only equity classes to receive net inflows between July and September, most likely motivated by the possibility of more central bank money-printing.
“Mutual fund investors continued to pin what faith they have on markets and asset classes supported by robust quantitative easing programs,” EPFR said.
While the U.S. Federal Reserve held off raising interest rates in September it could move in December, despite the increasingly fragile outlook for world growth, especially in China and emerging economies.
Funds pulled $35.2 billion from dedicated U.S. equity funds, according to EPFR.
European equities continued in favour however, taking $31.3 billion, already amounting to 190 percent of the full-year record set in 2013. EPFR added also that Japan equity inflows of $25 billion were the biggest quarterly figure since it started tracking them at the start of 2002.
Japanese and European equities have absorbed $56.4 billion and $104.5 billion year-to-date, well above last year’s levels, the data shows. U.S. outflows are running at $138 billion, dwarfing the $32 billion received last year.
Within Europe, investors appeared worried by the impact of the Volkswagen emissions scandal on German companies. Data showed big flows directed towards Italian and Dutch equity funds towards the end of the third quarter, BNP Paribas noted, citing the data.
The Volkswagen and Glencore scares prompted investors to pull out cash from European equities over the past week, albeit only $19 million.
Over the third quarter, European investment grade as well as junk-rated credit saw bigger losses of $824 million and $617 million respectively as a result of these problems.
Bond funds of all stripes saw outflows in the third quarter. Global bond funds lost $16.9 billion while U.S. and European debt shed $8.9 billion and $2.8 billion respectively.
“During a quarter marked by a sharp correction in China’s equity markets and persistent fear that the (Fed) would make good on its stated desire to start normalizing interest rates investors steered clear of most fixed income fund groups,” the report said.
Global and European money market funds took in around $100 billion over the quarter from risk-shy investors.
Emerging equities and bonds extended their run of losses on signs the developing world is headed for a protracted period of weakness or even crisis in the case of China and Brazil.
The EM equity exodus accelerated during the quarter, with outflows of $39.7 billion bringing year-to-date losses to $59.8 billion. The biggest losses were in Asia which saw outflows of over $20 billion.
Emerging bond funds shed $15 billion in the third quarter, versus $4.5 billion outflows in the first nine months of 2014.
Allocations to Brazil in emerging equity funds were on the brink of falling below 7 percent for the first time in more than a decade, EPFR noted, amid fears of a currency and political crisis in the country.
Brazil’s bonds, equities and currency are among this year’s worst performers.
“Latin America’s largest economy currently offers investors a toxic mixture of stalled growth, political gridlock, soft demand for commodities, above-target inflation and sliding credit ratings,” EPFR said. (Reporting by Sujata Rao; editing by John Stonestreet)