Non-domestic stock funds favored over U.S. equities in latest week: Lipper

NEW YORK Investors soured on U.S.-based stock funds for a third straight week and opted for non-domestic equity funds as compelling valuations in overseas markets lured new money, data from Thomson Reuters’ Lipper service showed on Thursday.

U.S.-based stock funds posted $3.3 billion of outflows in the week ended July 5, while non-domestic equities attracted $3.3 billion for the same period, Lipper data show.

“High valuations stateside and perhaps more bargains overseas are pushing investors across the pond,” said Tom Roseen, head of research services at Thomson Reuters Lipper. U.S.-based stock mutual funds posted $1.3 billion of outflows and stock exchange-traded funds posted $2 billion of outflows in the latest week.

“Micro- and macro-economics appear to be improving, particularly in the European Union. The European Central Bank is talking more hawkish and showing signs of comfort with recent economic data.”

Consequently, U.S.-based international and global debt funds posted $944 million of outflows over the weekly period, the first weekly outflows since early February, Lipper said.

Investors were also tentative about putting money to work in U.S. bond funds. Taxable bond funds posted $242 million in outflows to mark their second straight week of outflows. U.S.-based high-yield junk bond funds posted $1.16 billion of outflows, marking their third week of outflows from the funds, Lipper said.

But high-quality investment-grade U.S. bond funds posted inflows of $2.5 billion for the week, extending an unbroken weekly inflow streak since mid-December.

Low-risk money market funds attracted $1.6 billion in inflows to mark their second straight week of new demand.

“While it looked like there was no place to hide except for money market funds, investors were selective,” Roseen said. “In particular international equity funds, sector-energy funds, and sector-financial/banking funds were main attractors of investor assets. And despite rising rates – courtesy of the Fed, ECB and Bank of Canada hawkish tone – investors appeared to embrace corporate investment-grade debt funds, while shunning high-yield junk funds.”

U.S.-based energy stock funds attracted $228 million of inflows over the weekly period, their second straight week of inflows, according to Lipper data.

For their part, emerging market equity and bond funds ended their positive streak of new money. U.S.-based emerging markets equity funds posted $45 million of outflows over the weekly period, their first weekly outflows since early May, Lipper said. U.S.-based emerging market debt funds posted $862 million of outflows over the weekly period, the group’s first weekly outflows since early February, Lipper added.

(Reporting by Sam Forgione- Editing by Lisa Shumaker)