Investors pull record $29.5 billion from equity funds in China-driven rout: BAML

By Jamie McGeever

LONDON (Reuters) - Investors pulled a record amount of money out of global equity funds in the week to Aug. 26, according to Bank of America Merrill Lynch, a measure of the alarm that China's markets and economy have aroused around the world.

The $29.5 billion outflow, including $19 billion in just one day, was the largest since the series began in 2002, surpassing any weekly outflow engendered by the collapse of Lehman Brothers in 2008.

Stock mutual funds posted $24 billion in outflows, while stock exchange-traded funds bled $6 billion, according to the report. The $19 billion outflow on Aug. 25 was the second largest daily outflow since 2007 when comparable daily flow data became available, BAML said in a note Friday.

Worries over the health of China's economy and Beijing's struggle to contain the market upheaval since it devalued the yuan earlier in August sent Chinese stocks into a tailspin that pulled down global markets.

The rebound was sharp - oil, for example, rose 10 percent on Thursday alone. But the BAML figures, in part based on weekly flows from data-provider EPFR Global, are for the week to Wednesday Aug. 26.

Emerging market equity funds were hit hard. Investors withdrew a net $10.5 billion, the largest outflow since January 2008, BAML said. Funds that specialize in U.S. shares posted $12.3 billion in outflows, their biggest in 16 weeks, while Japanese stock funds found fans with $3.3 billion in inflows.

Low-risk money market funds attracted a hefty $22 billion, while precious metals funds raked in $1.1 billion, the most since January.

This tallied with a separate report from the Institute of International Finance, showing the largest outflow from emerging market stocks since the mid-2013 "Taper Tantrum" when the U.S. Federal Reserve signaled it might be about to raise interest rates but then quickly backed down.

Investors pulled a net $8.7 billion out of EM stocks this month, the IIF report said.

"Emerging market investors have been spooked by rising uncertainty about China," said Charles Collyns, chief economist at the IIF.

On Monday, Aug. 24, the seven emerging markets that provide daily flows data experienced outflows of $2.7 billion, as much as on Sept. 17, 2008, during the week of the Lehman Brothers bankruptcy, the IIF said.

In developed markets, European stocks posted a $3.6 billion outflow in the week to Aug. 26, the first outflow in 15 weeks and the biggest since October last year, BAML said.

In fixed income, $11.7 billion left bond funds, the largest since June 2013. Emerging market bond funds also had their biggest outflow since June 2013, BAML said, while high-yield bond funds posted their biggest weekly outflows so far this year at $4.9 billion.

So far this year, emerging market equities have shed $48.4 billion and developed market equities have attracted $48.9 billion, according to BAML.

(Additional reporting by Sam Forgione in New York Editing by Ruth Pitchford and Chizu Nomiyama)

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