Great Wall of China

China funds benefit from data, shift in perceptions about US deficit deal

EPFR Global-tracked China equity funds posted their second biggest weekly inflow year-to-date during the week ending 5 December as recent factory, retail and investment data showed the Chinese economy regaining momentum.

US equity funds, meanwhile, posted outflows for the ninth time in the past 11 weeks while flows into US bond funds slipped to a five week low.

Emerging markets equity and bond Funds sustained their year-end surge, with flows into EM equity funds hitting a 10 week high while the YTD total for EM bond funds climbed to within USD1bn of breaking the existing full year inflow record.

There are also some signs that investors on both sides of the Atlantic believe the Eurozone crisis may have passed its high point. Europe money market funds have seen net redemptions of over USD17bn during the past two weeks - versus inflows of more than USD35bn for their US counterparts - while flows into Europe equity funds hit an 11 week high and Europe bond funds extended their longest inflow streak since 2Q10.

Overall, EPFR Global-tracked bond funds took in a net USD4.46bn for the week, taking the YTD total past the USD450bn mark, while equity funds absorbed USD2.3bn and USD22.06bn flowed out of money market funds.

After two weeks of profit taking, flows into EPFR Global-tracked sector funds rebounded in early December as eight of the 11 major groups took in fresh money. With the Christmas shopping season on the horizon flows into consumer goods sector funds hit a 31 week high while technology sector funds snapped an outflow streak that started in mid-October.

Both of these fund groups were also buoyed by the better data coming out of China and hopes that the US Federal Reserve will affirm - and even strengthen - its commitment to quantitative easing when it meets on 12 December. 12. Hopes that China’s economic growth is regaining momentum had little impact on energy and commodities sector funds, though, with the former taking in less than USD10m and flows into the latter concentrated in gold and precious metals funds.

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