International equity funds post first inflows in eight weeks: ICI

By Sam Forgione

NEW YORK (Reuters) - Investors in U.S.-based mutual funds committed $1.6 billion in the first week of the year to those that specialize in international equities, possibly on the view that they have more upside than U.S. shares.

The inflows into foreign-focused stock funds in the week ended on Jan. 6 marked the first in eight weeks, according to data from the Investment Co Institute released on Wednesday. Funds that specialize in U.S. shares posted about $4 billion in outflows in the 15th straight week that investors pulled money from them.

Overall, stock funds posted $2.4 billion in outflows in their 11th straight week of withdrawals, albeit their lowest in eight weeks.

Bond funds attracted a meager $67 million in their first new cash commitments in nine weeks. The inflow reflects reduced outflows from taxable bond funds and continued appetite for municipal bond funds, which attracted their 14th straight week of new money.

Foreign-focused stock funds attracted inflows over much of last year, with many analysts citing expectations that looser monetary policy in Europe and Japan would support foreign shares.

But fears that higher interest rates in the United States could hurt markets elsewhere crimped demand for foreign-focused share funds and contributed to outflows in recent weeks. The U.S. Federal Reserve raised rates for the first time in nearly a decade in December.

The view that foreign shares have more upside than their U.S. counterparts, given looser monetary policy abroad, probably contributed to inflows into foreign equities, said Scott Clemons, chief investment strategist at Brown Brothers Harriman in New York.

He also said the European economy was still on an uptrend while the roughly seven-year U.S. recovery since the global financial crisis could be fading. "This is the oldest bull market of the global equity market," he said of U.S. stocks.

Clemons also said oil price declines and worries about global economic growth probably weighed on demand for U.S. shares. The Dow Jones industrial average and S&P 500 indexes had their worst four-day starts to a year ever over the period.

Hybrid funds, which can invest in stocks and fixed income securities, posted $2.1 billion in outflows to mark their 12th straight week of withdrawals.

The following table shows estimated ICI flows for the past five weeks. All figures are in millions of dollars.

(Reporting by Sam Forgione; Editing by Jennifer Ablan and Lisa Von Ahn)

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