August 22, 2018 / 4:47 PM / a month ago

Wary U.S. fund investors tiptoe into stocks in latest week -ICI

    By Trevor Hunnicutt
    NEW YORK, Aug 22 (Reuters) - U.S. fund investors crept into
stocks as emerging market sentiment deteriorated, betting on a
resolution of discord over Turkey and emerging markets,
Investment Company Institute (ICI) data for the latest week
showed on Wednesday.
    Stock mutual funds and exchange-traded funds (ETFs) based in
the United States netted $779 million in the week ended Aug. 15,
ICI said, as the Turkish lira plunged to an all-time low
and investors fretted about possible contagion in emerging
markets.
    It was the first week of positive sales for the funds in
three weeks. Funds focused on international shares took in $767
million during the period, while domestic equity funds collected
just $12 million, the trade group's data showed.
    During the week, markets punished Turkish President Tayyip
Erdogan's refusal to adopt an orthodox response to strong
inflation - raising interest rates - by selling lira.
    While the Turkish market is marginal within global financial
markets, stress there could spread as investors whose bets
soured in that market sell assets from South Africa to
Argentina. Those countries could struggle to repay debt
denominated in dollars as their own currencies weaken. The
biggest emerging market, China, is already under pressure from a
trade dispute with the United States.
    Yet hunkering down in domestic stocks may not solve all of
an investor's problems.
    Lamar Villere, a portfolio manager at St. Denis J. Villere &
Co LLC, said the U.S. economy is strong and he is impressed with
the financial results of almost exclusively domestic companies
his mutual funds hold.
    But he is holding a higher level of cash than normal and
said there are not many bargains to be found.
    "We'd like to put some to work, but we don't need to," said
Villere, who is based in New Orleans. "There's a lot of cheap
stocks that should be cheap and a lot of stocks that are too
expensive."
    During the week, U.S.-based bond funds attracted $1.7
billion, marking a 26th straight week of strong demand.
    Funds invested in commodities bled $674 million. The
dollar's 6 percent gain over the past half-year against its
major trading partners have hurt demand for gold, which
is priced in the greenback.
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in millions of dollars):
                 8/15     8/8     8/1    7/25  7/18/2018
 Equity           779  -1,667  -3,011     419      1,494
    Domestic       12  -3,408  -2,130     524      1,300
    World         767   1,741    -881    -105        195
 Hybrid        -1,479  -1,447  -2,268  -1,165     -1,829
 Bond           1,675   6,857   5,844   4,417      8,660
    Taxable     1,013   6,135   5,681   3,817      6,894
    Municipal     662     723     163     600      1,765
 Commodity       -674    -450    -101     164       -308
 Total            301   3,292     463   3,835      8,016
 
 (Reporting by Trevor Hunnicutt
Editing by Susan Thomas)
  
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