LONDON (Reuters) – Investors pumped record excessive volumes of cash into emerging markets shares and bonds in the previous week, Bank of America Merrill Lynch (BAML) stated on Friday amid expectations U.S. financial coverage might result in a weaker U.S. greenback.
FILE PHOTO – A person walks previous the Bombay Stock Exchange (BSE) constructing in Mumbai, India October four, 2018. REUTERS/Francis Mascarenhas
Flows into bonds reached $11.1 billion, the most important since May 2018, $four.three billion went into equities and $400 million have been pulled out of valuable metals, marking the primary drop in 9 weeks, in response to the report based mostly on EPFR knowledge and tracks fund flows from Wednesday to Wednesday.
It was additionally the most important week of inflows in three years to high-yield bonds with $four.eight billion and emerging market debt with $four.four billion.
BAML famous that since Jan. 2, buyers have purchased $36 billion of bonds and bought $10 billion of equities. Among the dangerous asset courses, there have been buys of $16 billion of emerging market equities and gross sales of $26 billion and $7 billion of U.S. and European shares respectively.
Investors have piled into emerging market equities and bonds in current months amid expectations that the U.S. Federal Reserve won’t increase rates of interest as shortly as beforehand anticipated and even not tighten its coverage.
(Graphic: EM BAML – tmsnrt.rs/2UTVbt9)
In the observe, BAML chief funding strategist Michael Hartnett informed shoppers that in his view “the greatest threat to EPS (earnings per share) in the next 3 years is an acceleration of global populism via taxation, regulation & government intervention”.
BAML stated its Bull and Bear indicator rose additional into impartial territory to four.four.
The financial institution additionally stated positions taken by personal shoppers confirmed no signal of the “irrational exuberance” skilled by markets through the tech bubble, which grew on the finish of the century.
“Since 2012, of every $100 invested by private clients, $55 has gone into debt, $35 into equities, and $10 into cash & alternatives,” they wrote, noting no sudden rise in dangerous belongings in portfolios.
(Graphic: BAML flows by asset – tmsnrt.rs/2UI4aNQ)
Reporting by Julien Ponthus; modifying by Josephine Mason