Last week was the worst for global equity funds since the beginning of the year.

Last week was the worst for global equity funds since the beginning of the year. During the week, clients of the funds took away more than $21 billion. Investors are taking profits in many regional and country funds against the backdrop of strong growth in stocks since the beginning of the year and the tough policies of the US Federal Reserve. The Russian stock market is also under certain pressure, but the strict monetary policy of the Central Bank of the Russian Federation.

International investors are actively reducing investments in risky assets, according to data from Emerging Portfolio Fund Research (EPFR). According to Kommersant’s estimates, based on a Bank of America report (taking into account EPFR data), for the week ending March 20, clients of all equity funds withdrew almost $21.2 billion from them. This is the first outflow in the last two months and the maximum since December 2023 of the year. In just the previous two months, international investors poured $130 billion into such funds.

The withdrawal of money affected many regional and country funds. The main outflows came from developed markets funds, which lost more than $20 billion, against $56.44 billion in receipts a week earlier. The main outflow came from US ($22 billion) and European ($2.3 million) funds. Positive results were recorded by Japanese ($0.5 billion) and international ($4.5 billion) funds. Sales also prevail in the favorites of recent months – emerging markets funds. According to EPFR, the net outflow of funds from such funds during the week amounted to more than $1 billion, which is almost one and a half times higher than the outflow in the previous week. Nevertheless, the balance of attractions into such funds since the beginning of the year remains positive, with a net inflow of $53.9 billion.

Last week’s sales were of a technical nature, as the world’s leading indices showed significant growth as a result of the influx of recent weeks. Since the beginning of the year, leading American indices have grown, according to Investing.com, by 9–12% and have reached new highs; in particular, the S&P 500 index has surpassed the level of 5.2 thousand points for the first time in history. Leading European indices grew by 7–9% during the same time; French and German stock indicators also reached historical highs.

As Alfa Capital portfolio manager Sergei Bdoyan notes, in the first quarter the world’s leading indices almost fulfilled the forecasts included in the managers’ models for the entire year. “The sales of the last week are nothing more than collective profit-taking,” the expert notes.

Investors’ nervousness was heightened by last week’s meeting of the US Federal Reserve, following which the regulator maintained the key rate at 5.25–5.5%. In the accompanying release, the FOMC did not rule out reducing the interest rate corridor by 0.75 percentage points, to 4.5–4.75%. The next decline, according to traders surveyed by the CME FedWatch Tool, could occur in June with a 68% probability. “Right now, inflation expectations are rising quite quickly. Against this background, investors are withdrawing money from stock funds and the money market and transferring them to commodity markets,” notes Astero Falcon portfolio manager Alena Nikolaeva.

There are also internal reasons for sales in emerging markets, related to not very strong macroeconomic data from China and increasing geopolitical pressure from the United States. As Alena Nikolaeva notes, many Chinese companies are lowering their forecasts for future periods. In addition, the US has returned to discuss legislation to strengthen disclosure and audit rules for Chinese companies that have their receipts on US exchanges. “For the general market sentiment, such rhetoric is also negative,” she notes.

Despite the isolation of the Russian stock market, it faces similar problems, including high inflation expectations and the Central Bank’s tight monetary policy. Following the meeting held on Friday, the Bank of Russia kept the rate at 16%.

Senior economist at the Sinara investment bank, Sergei Konygin, points out that in the comments the regulator indicated many factors that increase inflationary pressure, therefore, to return inflation this year to the target 4–4.5% per annum, a tight monetary policy is necessary. Therefore, the market does not expect it to begin to soften before the second half of the year. “Shares have to compete with risk-free money market rates, which are higher than the dividend yield of many large companies, which is 12-13%,” notes Sergey Bdoyan. In such conditions, the Moscow Exchange index fails to gain a foothold above the level of 3300 points.

Vitaly Gaidaev