Global investors pulled $7.4 billion from equity funds in the week to Wednesday, the largest outflow in around three months, as uncertainty over U.S. and Japanese monetary policy unnerved stocks, Bank of America Merrill Lynch (BAML) said on Friday.
A spike higher in longer-dated bond yields had caused yield curves in the United States, Japan and Germany to steepen over the past two weeks, prompting the redemptions from European, U.S. and emerging markets stocks funds.
Although there was little expectation that the U.S. Federal Reserve would raise rates at its Sept. 20-21 meeting, investors erred on the side of caution and parked $15.6 billion in money market funds in the run up to the Fed decision.
Investors were also wary ahead of the Bank of Japan’s Sept. 21 meeting at which it made an abrupt shift in policy, saying it would buy government bonds when necessary to keep 10-year yields at their current levels of around zero percent.
The BOJ reassured markets that it would continue to buy riskier assets, but some analysts suggested it had overhauled its stimulus policy so it would be easier to exit in future.
“BoJ and Fed ‘taper-tantrum’ fears may have sparked redemptions in emerging market equity funds and in high yield bond funds,” BAML analysts wrote in a note.