Confidence over China's economic growth prospects has been the main driver of inflows to equity markets in the mainland as well as to Asia and emerging markets. But this months' sell-off in Chinese shares has affected sentiment for other markets and has put the steady stream of inflows on hold.

Equity funds worldwide posted a net outflow of $3.33 billion in the week ending August 19, according to data from Massachusetts-based EPFR Global, which tracks more than $10 trillion in fund assets worldwide.

The jump in risk appetite was not enough to stem outflows from money market funds. Money market funds worldwide posted a net outflow of $12.54 billion. Fixed-income funds worldwide, excluding money market funds, took in a net inflow of $3.92 billion, however.

Doubts about the quality of the loans doled out at breakneck speed by Chinese banks during the first half of 2009 prompted investors to book profits and take some of their recent gains off the table. In terms of outflows, the week ending August 19 was the worst week for China equity funds since the first quarter of 2008, while Asia ex-Japan and global emerging market equity funds hit 24-week and year-to-date highs, respectively.

Global emerging market equity funds posted a net outflow of $946 million, the most since the second week of December 2008. Asia ex-Japan equity funds were hit with a net outflow of $810 million.

With questions about the loan books of Chinese banks intensifying, EPFR Global says investors had a hard time visualising Chinese capital flowing into Taiwan as a result of the recent improvement in cross-straits relations. Redemptions from Taiwan Equity Funds hit their highest level, in US dollar terms, in over seven years as investors went looking for markets with more defensive stories.