Global equity funds see 5-week high inflows as AI worries fade

Weekly Fund Flows Overview

Feb 20 (Reuters) - Global equity funds received their strongest inflows in five weeks in the seven days to February 18, as easing concerns over artificial intelligence stocks and investor rotation into other sectors supported demand, while renewed hopes for Federal Reserve rate cuts lifted sentiment toward U.S. growth.

Investors poured $36.33 billion into global equity funds during the week, marking the strongest weekly inflow since January 14, LSEG Lipper data showed.

U.S. consumer price data released last Friday showed inflation rose 2.4% year-on-year in January, close to expectations of a 2.5% increase, reinforcing market bets on two Federal Reserve rate cuts this year.

Europe Leads Inflows

Regional Equity Flows

Leading regional inflows, European funds attracted $17.22 billion, broadly in line with the previous week’s $17.68 billion, supported by the STOXX 600 index climbing to a record high.

U.S. and Asia Inflows

U.S. funds recorded net inflows of $11.77 billion after a $1.48 billion outflow the previous week, while Asian funds drew a net $3.8 billion.

Sector Fund Trends

Among sectoral funds, industrials, metals and mining, and technology were in demand, attracting weekly net inflows of $1.82 billion, $818 million and $696 million, respectively.

Bond and Money Market Flows

Global bond funds recorded a seventh straight week of net inflows, attracting $19.79 billion.

Short-Term and Euro Bonds

Short-term bond funds drew $5 billion, the highest weekly inflow since December 24. Euro-denominated bond funds and corporate bond funds also attracted net purchases of $2.54 billion and $2.35 billion, respectively.

Cash and Money Markets

Money market funds received $7.05 billion, extending inflows to a fourth consecutive week.

Commodities Flow Shift

Gold and precious metals funds, however, saw net outflows of $1.86 billion, snapping a five-week streak of inflows.

Emerging Markets Momentum

In emerging markets, equity funds attracted $8.1 billion, lifting year-to-date inflows to $56.52 billion. Bond funds also drew $1.94 billion in a second straight week of net purchases, data for 28,639 funds showed.

Analyst View on AI Rally

"While the recent underperformance of U.S. tech stocks relative to emerging markets echoes the eve of the dotcom bust, we think the AI rally still has a bit further to run," said Elias Hilmer, market economist at Capital Economics.

 "That said, if the AI bubble bursts, we think equities in EMs would hold up better than in the U.S."    

Data Source: LSEG Lipper; Byline

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Harikrishnan Nair)