US stock fund buyers pull out US$9.4b in one week

Withdrawals mark the biggest outflow from the products since July 2012 as Fed concerns deepen

PUBLISHED : Saturday, 24 August, 2013, 12:00am
UPDATED : Saturday, 24 August, 2013, 5:16am

Investors in funds based in the United States pulled roughly US$9.4 billion out of stock funds in the latest week, marking the biggest outflow from the funds since July 2012, data showed on Thursday.

A large chunk of the outflows over the week to August 21 came from the SPDR S&P 500 ETF Trust. Investors withdrew US$10.27 billion from the exchange-traded fund, which tracks the performance of the benchmark S&P 500 Index.

The index dropped 2.53 per cent over the weekly reporting period as positive US economic data reinforced concerns that the Federal Reserve would soon scale back its US$85 billion in monthly bond purchases.

"Fed actions are front-and-centre," said Jeff Tjornehoj, head of Americas research at Lipper. "We had plenty of people trying to avoid the next sell-off" in US stocks, which could occur when the Fed announced a reduction in its bond-buying.

US stock markets fell over the week partly on hesitation leading up to August 21, when the Federal Open Market Committee released the minutes of its July 30-31 meeting.

The minutes offered few clues on the timing of a reduction in the Fed's bond-buying programme.

Outflows from ETFs accounted for the total withdrawals from stock funds in the latest week. Investors withdrew US$11.4 billion from stock ETFs, the most in nearly two years. Stock mutual funds, meanwhile, took in US$2.05 billion, down from US$2.56 billion the week before.

The big outflows from stock ETFs led to the overall outflow of roughly US$9.4 billion from stock funds, which also marked the first outflow from stock funds in eight weeks.

ETFs are generally believed to represent the investment behaviour of institutional investors, while mutual funds are thought to represent that of retail investors.

Funds that hold European stocks attracted US$1.08 billion in new cash, however, marking the biggest inflow to the funds in 10 weeks. The funds were popular even as the FTSEurofirst 300 Index fell 2.63 per cent over the week.

Investors have settled on the idea that European stocks' "worst days are behind them", Tjornehoj said in reference to signs that the euro-zone debt crisis had improved.

Data on August 14 showed that the economies of Germany and France grew more quickly than expected in the second quarter, pulling the euro zone out of a 1½-year recession.