Europe Equity Funds Post Biggest Outflows Since 2009 (Update1)
March 18, 2010, 10:48 PM EDT(Updating with EPFR comment in second paragraph and UBS comment on the euro in the sixth paragraph.)
By Jonathan Burgos and Garfield Reynolds
March 19 (Bloomberg) -- European equity funds posted net outflows of $1.06 billion in the week to March 17, the biggest net withdrawal since May 2009, amid concerns about Greece’s debt crisis, EPFR Global said today in a statement.
“German calls for austerity, weak domestic demand and the clouds hanging over Greece’s economy helped to extend outflows experienced by the Europe equity funds during early 2010,” the Cambridge, Massachusetts-based research group said in a statement. The redemptions “came despite the competitive advantage for regional exporters conferred by the weaker euro.”
It was the fifth week in a row that European equities were the only major developed market investment group tracked by EPFR to post outflows.
The euro was set for its biggest weekly loss in six as Greek Prime Minister George Papandreou said yesterday he may turn to the International Monetary Fund for help unless EU leaders agree to set up a lending facility at a summit March 25- 26. The IMF option has already been dismissed by European Central Bank President Jean-Claude Trichet and French President Nicolas Sarkozy, who said it would show the EU can’t solve its own crises.
The euro traded at $1.3611 as of 11:12 a.m. in Tokyo after yesterday dropping 1 percent to $1.3608 in New York. The euro’s five-day decline against the dollar of 1.2 percent was the biggest since the week ended Feb. 5.
Greece ‘Haunts’ Euro
“The Greek story is far from resolved and will continue to haunt the euro,” Geoffrey Yu, London-based currency strategist at UBS AG, wrote in a report yesterday. “Weakness will persist, making us comfortable with our three-month euro target of $1.30.”
Europe equity funds were the only major developed markets fund group tracked by EPFR to post outflows. U.S. and Japan Equity Funds extended their best week since mid-November, EPFR said.
Japan equity funds’ year-to-date inflows climbed to $2.2 billion in the second week of March, EPFR said. This fund group, which had its best month in February since April 2006, has posted inflows for 12 straight weeks as the nation’s January exports rose more than economist estimates and the Bank of Japan committed to keep its monetary policy loose to combat deflation.
Emerging-market equity funds received the most funds in nine weeks. Emerging-market bond funds received $587 million and high-yield bond funds got $954 million, according to EPFR.
--Editors: Nick Gentle, John McCluskey.
To contact the reporters on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.
To contact the editor responsible for this story: Nicolas Johnson in Tokyo at nicojohnson@bloomberg.net.
