Global equity funds experience $15B+ outflows due to rate hike concerns.

(Reuters) – Global equity funds suffer outflows as borrowing costs rise

During the seven days to June 21, global equity funds experienced substantial outflows. Concerns over higher borrowing costs, triggered by the European Central Bank’s interest rate hike and the Federal Reserve’s indication of more hikes, led investors to withdraw a net $15.12 billion from these funds. This is a significant shift from the previous week, which saw net inflows of $16.04 billion.

Fed Chair Jerome Powell’s hawkish tone during his testimony before the U.S. House Financial Services Committee added to the concerns. He stated that a majority of policymakers expected two more quarter-point rate hikes by the end of the year.

The Bank of England surprised investors by raising interest rates by half a percentage point on Thursday, citing the need for more time for inflationary pressures to subside.

During this period, U.S. and European equity funds witnessed outflows of $16.47 billion and $1.81 billion, respectively. However, Asian funds saw inflows of about $2.6 billion.

The healthcare and industrial sectors experienced net selling of $1.14 billion and $174 million, respectively. On the other hand, financials attracted inflows of about $710 million.

Meanwhile, global bond funds continued their inflows streak for the 14th consecutive week, with approximately $4.07 billion flowing in.

Both global government and corporate bond funds attracted about $1.9 billion each. However, high yield, loan participation, and convertible funds suffered outflows of about $400 million each.

Additionally, investors withdrew a net $15.13 billion from money market funds, marking the second consecutive week of outflows.

In the commodity funds category, precious metal funds experienced net selling for the fourth successive week, with investors withdrawing $498 million. Energy funds also saw outflows of $176 million.

Data for 24,028 emerging market funds showed that investors bought a net $714 million worth of bond funds, marking the third consecutive week of net buying. They also purchased $812 million of equity funds.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Vinay Dwivedi)

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