Global investors turn sellers in equity funds on recession fears

Global equity funds faced outflows in the week to 29 June, as recession fears crept higher, with major central banks looking keen to raise interest rates further to tame soaring inflation.

According to Refinitiv Lipper, investors disposed of a net $20.79 billion worth of global bond funds in a fourth straight week of net selling.

Federal Reserve Chairman Jerome Powell said this week that there was a risk the US central bank's interest rate hikes could slow the economy too much, but the bigger risk was persistent inflation.

Aggravating investors concerns was US consumer confidence reading, which dropped to a 16-month low in June on worries about high inflation.

European and US equity funds witnessed outflows of $6.46 billion and $3.78 billion, respectively, although investors purchased Asian funds worth $1.64 billion.

Among sector funds, financials, healthcare, tech and energy funds saw outflows of more than $500 million each.

Meanwhile, bond funds recorded weekly outflows of $20.79 billion as selling continued for the fourth week.

Global investors offloaded short- and medium-term funds of $7.51 billion in their 25th straight week of net selling. High yield funds also recorded outflows worth $3.44 billion but government funds attracted inflows worth $662 million.

Money market funds too recorded outflows, losing $23.55 billion when investors exited for a third straight week.

Data for commodity funds showed investors withdrew $1.42 billion, the most in six weeks, out of precious metal funds while energy funds saw outflows of 256 million, the first net selling in four weeks.

An analysis of 24,326 emerging market funds showed equity funds drew $509 million, marking a second weekly inflow but bond funds faced outflows of $3.51 billion for a third week.