Tech Weakness Triggers Sharp Drop in Global Equity Fund Inflows This Week
Global Equity Fund Flows and Market Sentiment
June 26 (Reuters) – Global equity fund inflows slowed sharply in the week to June 24, as concerns over debt-funded technology spending and a hawkish stance of the U.S. Federal Reserve cooled risk appetite.
Weekly Fund Flow Data
Investors purchased a net $7.51 billion worth of global equity funds during the week, down about 86% from net buying of $55.53 billion in the previous week, according to LSEG Lipper data.
Technology Sector Under Pressure
The slowdown came as investors grew more wary of stretched technology valuations, with debt-funded spending by major tech companies drawing closer scrutiny. Elon Musk’s SpaceX joined other mega-cap names in tapping bond markets, adding to concerns that the sector’s investment boom is increasingly reliant on borrowing.
Interest Rate Concerns
Sentiment was also pressured by persistent rate concerns, as Thursday’s Commerce Department data showing May PCE inflation at 4.1%, its highest since April 2023, reinforced expectations of a possible 25-basis-point Fed hike later this year.
Regional and Sector Fund Flows
European and Asian equity funds drew inflows of $6.28 billion and $2.95 billion, respectively, during the week, down from $11.71 billion and $3.82 billion in the previous week. Meanwhile, U.S. funds recorded $3.53 billion in outflows.
Technology sector funds logged weekly net outflows of $17.83 billion, broadly reversing the previous week’s $21.5 billion in inflows. Financial and industrial sector funds also recorded net sales of $750 million and $1.04 billion, respectively.
Bond and Money Market Funds
Investors, meanwhile, bought a net $10.85 billion worth of bond funds, extending their recent buying streak into a 12th straight week.
Global hard-currency bond funds, short-term bond funds and dollar-denominated medium-term bond funds attracted notable inflows of $3.1 billion, $2.42 billion and $1.87 billion, respectively.
Money market funds posted outflows of $42.8 billion during the week, the largest weekly withdrawal since April 15.
Commodity and Emerging Market Funds
Among commodity funds, gold and other precious metal funds recorded a sixth consecutive weekly outflow, with net sales of $545 million. Energy funds also posted weekly net sales of $81.9 million, following two successive weeks of inflows.
In emerging markets, the selling streak in equity funds extended into a ninth straight week, with $3.39 billion in net sales. Bond funds, however, attracted $132 million, their first inflow in three weeks, data covering 28,875 funds showed.
(Reporting by Gaurav Dogra; additional reporting by Patturaja Murugaboopathy in Bengaluru; Editing by Rashmi Aich)