Investors shift cash from equities to money market

New York: Equity funds worldwide suffered more than $11 billion (Dh40.39 billion) of net outflows in the first week of July, while money market funds saw the biggest inflows in 18 months amid fears of a double-dip recession, EPFR Global said yesterday.

Money market funds, an equivalent of cash for many investors, had inflows of $33.5 billion (Dh123.02 billion), while equity funds saw $11.25 billion (Dh41.31 billion) move out the door, fund tracker EPFR said in a statement.

Bond funds in aggregate absorbed another $3.64 billion (Dh13.36 billion) for the week ended July 7 and global emerging markets equity funds took in $517 million (Dh1,898.55 million).

Investors have become increasingly concerned about faltering economic growth after a rash of weaker than expected data. Last week, a report showed US employers cut far more jobs than expected in June and the unemployment rate hit 9.5 per cent, the highest in nearly 26 years.

Double dip

Double dip is a term that refers to a recession followed by a short-lived recovery. The World Bank said in June that a double-dip recession could not be ruled out in some countries if investors lose faith in efforts in Europe and elsewhere to tackle rising debt levels.

"Worse than expected US labour and housing market data and fear of what stress tests of major European banks will reveal continued to weigh on sentiment towards the major developed market and the funds that invest in them during the first week of July," EPFR said.

Investors regained some confidence in the fund group in the latest week, sending fresh money to Asia. Global emerging market equity funds saw $517 million (Dh1898.55 million) in inflows and Asia ex-Japan equity funds absorbed $124 million (Dh455.35 million). Europe, Middle East and Africa funds and Latin America focused funds had outflows, suggesting willingness to take risks is still tentative. Latin America posted its 13th consecutive week of outflows, driven by fears of a knock-on effect if the US economy slows significantly.

United States

Funds investing in the United States, the European Union's biggest export market had a rough week, with overall redemptions from US equity funds exceeding $10 billion for only the second time this year.