Strong inflows to US funds continue

US equity funds and money market funds absorb inflows, while Asia ex-Japan funds continue to suffer from net outflows. Taiwan bucks the regional trend with eight straight weeks of net inflows.
US equity funds, money market funds and financial sector funds absorbed inflows in a memorable week when the US Federal Reserve cut its discount rate by 25 basis points, slashed its benchmark federal funds rate by 75 basis points and supported the fire-sale of investment banking major Bear Stearns to rival JPMorgan Chase, according to data provider EPFR Global. Based in Massachusetts, EPFR tracks around $10 trillion in assets in traditional and alternative funds worldwide.

With the Federal Reserve doing everything it can to prevent the lack of credit from triggering a recession û even though many analysts believe a recession is already underway û US equity funds received strong inflows last week.

All other major equity fund groups posted outflows last week, however, as did emerging markets, global, high yield and US bond funds.

Commodity sector funds, emerging market local currency bond funds, Russia equity funds and Brazil equity funds all absorbed fresh money as investors again looked for hedges to offset a dollar which hit a record low versus the euro during the third week of March.

But investors appeared to be taking profits in commodity funds towards the end of last week.

ôWhile commodity funds had inflows for the week as a whole, our daily fund flow data shows investor outflows from commodity funds on March 18 and again on the March 20, consistent with the sharp sell-off in everything from precious metals to agricultural commodities starting mid-week,ö says Brad Durham, managing director at EPFR Global.

Sentiment towards Europe remains sour, with investors redeeming $3 billion out of Europe equity funds and pulling over $2 billion out of global equity funds which have on average a 40% exposure to the region. Withdrawals from emerging Europe regional funds were also the main reason that Europe, Middle East and Asia (EMEA) equity funds posted outflows for the week.

For the second week running most emerging markets suffered as investors worried about the impact of dollar weakness on export competitiveness, although the commodities story softened the blow for Latin America and EMEA Equity Funds. Asia ex-Japan Funds were hit hardest, posting outflows of $1.2 billion for the week as performance was off 7.6%. Investors also pulled $363 million out of the diversified global emerging markets funds.

Year-to-date investors have removed over $11 billion from Asia ex-Japan equity funds, with some $5 billion of that total pulled out of China and Greater China funds. But Taiwan country funds posted their eighth straight week of inflows on expectations that an opposition victory in the presidential elections will set the stage for a thaw in relations with China.
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