Global consumer discretionary funds see highest inflow in nearly six years

By Patturaja Murugaboopathy

(Reuters) - Funds worldwide that track consumer discretionary sectors have lured the highest money in nearly six years in January, Refinitiv data showed, on hopes that the pandemic would subside soon with vaccinations started in many parts of the globe.

According to Refinitiv data, consumer discretionary sector funds saw inflows of $2.5 billion in January, the highest since March 2015.

At the same time, the consumer staples sector funds witnessed net sales of $1.2 billion last month, the third consecutive outflow.

Graphics: Flows into consumer discretionary sector - https://fingfx.thomsonreuters.com/gfx/mkt/qzjpqmrarpx/flows%20into%20consumer%20discretionary.jpg

Investors tend to favor the consumer discretionary sector when they see signs of economic recovery, as spending on non-essential items such as automobiles and luxury items increases.

On the other hand, they prefer consumer staples sector during economic downturns as money would be spent primarily on necessities such as food and beverages.

The MSCI Consumer Discretionary sector index has risen over 5% this year, compared with the MSCI Consumer Staples sector index's decline of over 2%.

HSBC said it prefers discretionary over the staples sector in a report on Thursday.

"We expect (Asia's) discretionary sector to record around 85% operating profit growth (average) this year while staples that have benefited from the pandemic will lag due to a high base effect," it said.

"We also expect to see pent-up demand released as 'normal' activities are resumed such as travel or simply eating out."

Graphics: MSCI Consumer discretionary vs Staples index - https://fingfx.thomsonreuters.com/gfx/mkt/nmopaoedmpa/MSCI%20staples%20vs%20discretionary%20index.jpg

The Refinitiv data covered 339 consumer discretionary sector funds around the world and 144 consumer staple funds.

(Reporting by Patturaja Murugaboopathy; Editing by Steve Orlofsky)

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