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This week, our resident Quant, Sayad Baronyan, highlights the impact of the cautious stance adopted by developed market central banks as a result of the global economic outlook…

In the week before the FOMC meeting on 30/01/2019 bond funds saw a total inflow of 9.4 billion US$ vs. equity funds which saw an outflow of 15 billion US$.

The outlook of the global economy is moving developed market central banks into a cautious stance. This is increasing interest in emerging markets (EM) bond and equity funds - in the last week alone, EM equity funds saw a total inflow of 4.4 billion US$, mainly from institutional investors. In addition, EM bond funds saw an inflow of 1.2 billion US$ – mainly in EM Hard Currency bond funds.

The US government shutdown and concerns on the global growth outlook continued put pressure on investor sentiment in developed markets. Developed market equity funds suffered outflows of 19.5 billion US$. An outflow of -15 billion US$ was the main driver of developed market equity outflows. Western Europe also saw an outflow of -3.7 billion US$, where APAC funds saw inflows of 1.45 billion US$ led by Japan passive funds. The cautious stance of central banks and the decreased expectation of rate hikes has increased investor attention toward developed market bond funds. This asset class saw inflows of 8.2 billion US$. This was led by inflows into intermediate, long-term and high yield funds.

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Equity Fund Flows
Equity Fund Flows

Bond Fund Flows

Bond Fund Flows

 

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