- Investors continued to flee a grim US stock market in
July, with early industry estimates suggesting that some $47billion was
pulled out of equity mutual funds - the largest net monthly outflow in
history, according to new data. The forecasts have raised concerns that
investors are losing faith in equities and could further upset an already
volatile market.
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- Wall Street received another another setback on
Thursday after downbeat reports on reports on manufacturing data and
unemployment benefits cast doubt on US economic recovery. By midsession
yesterday, the Dow Jones Industrial Average was down 200.06 to 8,536.53,
while the broader S&P 500 index gave up 23.83 to 887.79.
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- Investors already pulled $18bn from equity mutual funds
in June as the stock market lurched lower, compared with a $5bn net inflow
in May, according to the Investment Company Institute (ICI), the mutual
funds trade group. The second straight month of big equity fund outflows
in July, would be the fifth monthly outflow in 12 years.
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- "It may well be that we are seeing a re-think on
equities as an asset class. Capital gains in the past 12 years have been
badly eroded and we could see sustained net outflows continue," said
David Bowers, chief investment strategist at Merill Lynch. Don Cassidy,
a senior analyst at Morningstar, the fund tracker said July was starting
to look like last September when the terrorist attacks in New York and
Washington prompted investors to pull $30bn equity mutual funds.
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- "You have to believe July will be more than
September.
Does the upper $20bns (outflows) make sense? Yes. Does upper $30bns make
sense? Yes," said Mr Cassidy.
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- He said likely significant outflows in July, suggested
that the market may be near its bottom.
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- Merrill, in its new mutual funds monitor, has combined
data from ICI, TrimTabs and AMG Data Services to reach an overall estimate
of a $47bn net outflow from mutual funds in July. That number would be
the highest ever in money terms, but not as a percentage of net equity
assets under management.
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- AMG forecasts a net outflow of $31bn for the four weeks
ending July 24, based on those mutual funds that report on a weekly
basis.
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- TrimTabs, which tracks 15 per cent of all funds on a
daily basis, was due to release official July estimates late yesterday
but a spokesman said equity fund outflows could be above $50bn.
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- Strategic Insight, a mutual fund research company based
in New York, believes July net equity fund outflows could exceed
$30bn.
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- Avi Nachmany, director of research at Strategic Insight
said portfolio managers were serving as a buffer to selling pressure by
investors.
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- In June, portfolio managers in equity funds purchased
about $9bn, while ICI outflow numbers showed an $18bn outflow from those
funds, he said. The outflows were small in a $4 trillion equity mutual
fund industry.
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- He said big equity fund outflows in the past 30 years
had been limited, short-lived and non-recurring.
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- Meanwhile, investors' disatisfaction with equities has
led to increased interest in bond and socially responsible funds.
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