Global equity funds beat hasty retreat as recession fears spook investors

In the week ending May 11, equity funds across the globe witnessed a surge in outflows on the back of fears of an economic slowdown and further tightening by central banks as they take steps to stem inflation.

In the fifth straight week of net selling, investors exited global equity funds worth $10.53 billion, compared with just $1.65 billion worth of net selling in the previous week.

MSCI’s index of world shares plunged to its 1-1/2-year low of 607.4 this week as inflationary pressures raised fears of an economic hard landing.

While US equity funds witnessed net selling worth $8.46 billion, European funds saw net selling worth $4.33 billion; investors in Asia were less spooked and saw net buyers worth $2.23 billion.

Global bond funds posted outflows of $13.23 billion in a sixth straight week of net selling. Global short- and medium-term bond funds saw outflows worth $8.14 billion in the biggest weekly outflow since June 2020.

Spooked investors withdrew $1.73 billion out of money market funds in their second weekly net selling in a row.

As for the commodities market, funds showed weekly net selling in gold while precious metal funds jumped to a two-month’s high of $1.54 billion, even as gold prices broke their nadir of 200-day moving averages.

An analysis of 24,155 emerging market funds showed that investors sold equity funds of $2.49 billion and bond funds of $2.65 billion, marking a fifth consecutive week of outflow in both segments.

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