Global equity fund outflows hit $ 23 billion due to fears over coronavirus

The rush for investors in funds investing in global stocks has accelerated in the past week, with $ 23.2 billion in withdrawals, the biggest exit since August 2019, as the economic impact of the spread of the coronavirus was intensifying.

Investors withdrew $ 19.4 billion from global equity mutual funds and exchange-traded funds from week to Wednesday, according to data from EPFR Global. Funds investing in European stocks posted cash outflows of $ 2.9 billion, up from $ 16 million the previous week, marking the worst weekly outflow since July 2016.

“Although cases are starting to appear in the United States, the spread of the coronavirus has been more advanced in Europe, especially in Italy,” said Martin Fridson, chief investment officer at Lehmann Livian Fridson Advisors.

Italy must inject 3.6 billion euros into its economy to mitigate the impact of the largest coronavirus epidemic in Europe.

Funds invested in European bonds also had a difficult week.

Investors pulled in $ 2.6 billion last week, compared to $ 9 million in withdrawals the previous week, the worst exits since November 2019 and the first since December 2019. Funds invested in global high-yield junk debt have suffered $ 7.9 billion in exits in the past week, up from $ 6.8 billion the previous week, the worst exit since February 2018.

In the United States, funds that invested in high-yield bonds experienced a slowdown in investor sales. These funds recorded $ 2.9 billion in cash outflows last week, compared to $ 6.7 billion the previous week, according to EPFR data.

“One factor is that the investment grade index and the US high yield index have both become more expensive than their European counterparts since early 2019,” said Mr. Fridson. “So in terms of relative assessment, Europe was particularly vulnerable.”

Investor withdrawals also declined in funds that invest in US stocks, with $ 6.2 billion in exits last week, compared to $ 17.7 billion in exits the previous week.

Danielle DiMartino Booth, chief executive of Quill Intelligence, a research group, said that the Federal Reserve’s emergency rate cuts by half a percentage point this week helped cushion the blow from US stocks and the markets. business credit.

The Fed’s surprise cut in its key rate on federal funds followed statements of support from finance ministers and central banks around the world as the G7 countries coordinated their message to the markets.

“It was enough for stock relief and enough to thaw frozen credit markets,” said DiMartino Booth. “We hadn’t seen any new business credit agreements in the past week and now policymakers have resurrected that. But credit will continue to force the hand of Fed President (Jay) Powell over and over until he runs out of chips to bet. “

The US markets suffered another day of losses on Thursday as yields on US Treasuries hit record lows.