Global Equity Funds See Significant Outflows Amid Year-End Profit Booking

Investor optimism wanes as global equity funds experience major withdrawals ahead of year-end holidays, marking largest weekly net selling since June.

Global equity funds experienced significant withdrawals in the week leading up to Dec. 20, as investor optimism regarding potential rate cuts diminished and profit-taking ensued ahead of the year-end holidays. The markets had undergone a sharp rally since late October, but investors took the opportunity to reassess their positions during the week, resulting in a net selling of $12.5 billion worth of equity funds. This marked the largest weekly net selling since June 21.

The MSCI All-World index also faced a 0.9% decline on Wednesday, its steepest drop since Oct. 16, encountering resistance near its March 2022 high of 724.49. Despite the recent pullback, the index has climbed nearly 15% since reaching a seven-month low on Oct. 27. Notably, U.S. equity funds saw the largest outflow, with a net withdrawal of $10.45 billion, the highest amount since Sept. 27. European and Asian funds also experienced withdrawals of $1.24 billion and $279 million, respectively. In terms of sectors, the tech sector witnessed $1.16 billion of outflows, a sharp contrast to the net purchases of about $1.94 billion in the prior week. Additionally, financials and healthcare recorded outflows of $838 million and $618 million, respectively. On the other hand, global bond funds saw net selling for the second consecutive week, with outflows amounting to $5.37 billion. Global corporate bond funds broke an eight-week buying streak, with investors offloading funds worth a net $4.03 billion during the week. However, government and high-yield funds received inflows of $1.67 billion and $882 million, respectively. Meanwhile, global money market funds experienced a second straight week of outflow, with net selling totaling $35.61 billion. In the commodities segment, energy funds witnessed a net selling of $99 million, marking the first weekly outflow in four weeks. Precious metal funds, on the other hand, attracted $22 million in net purchases, its lowest inflow in three weeks. Data covering 29,155 emerging markets funds revealed that investors sold $5.66 billion worth of equity funds, the largest weekly net selling since March 2020. EM bond funds also witnessed outflows, amounting to $721 million on a net basis.

The week leading up to Dec. 20 saw significant withdrawals in global equity funds, as investor sentiment shifted and profit-taking took precedence. The markets experienced a notable pullback, with various sectors and regions witnessing outflows. Additionally, global bond funds and emerging markets funds also saw net selling, indicating a broader trend of investor caution.