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Equity Funds Draw Year’s Most Weekly Inflows, Citigroup Says

U.S. Federal Reserve Chairman Ben S. Bernanke
Ben S. Bernanke, chairman of the U.S. Federal Reserve. Photographer: Andrew Harrer/Bloomberg

Global equity funds lured the largest weekly inflows this year amid speculation the U.S. Federal Reserve will introduce a third round of asset purchases known as quantitative easing, according to Citigroup Inc.

Equity funds attracted $12.1 billion in the week ended Sept. 12, Markus Rosgen and Yue-Hin Pong, analysts at the brokerage, wrote in a report today. Global emerging-equity funds lured $390 million, according to the report, which cited data compiled by EPFR Global.

The inflows preceded the Fed’s announcement yesterday that it will expand holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month as it seeks to boost growth and reduce unemployment. European Central Bank President Mario Draghi said on Sept. 6 policy makers agreed to an unlimited bond-purchase program as they try to regain control of interest rates in the euro area.

“When there’s more liquidity in the market and there’s bond purchases by the ECB recently, we expect some flows from bonds into equities,” Citigroup’s Pong said by phone from Hong Kong today. “Given that Asian shares are relatively cheap in the global market, we expect more inflows here.”

Asian-focused funds attracted $100 million in the week to Sept. 12, while China funds lured $239 million and Hong Kong drew $89 million, according to the Citigroup report.

The MSCI All-Country World Index gained 0.6 percent to 336.68 as of 10:50 a.m. in Hong Kong, poised for the highest close since March 19. The gauge is valued at 13.1 times estimated profit, compared with the MSCI Asia Pacific Index’s 12.8 times. The Asia Pacific measure rose 1.9 percent today.

Worst Recession

Fed Chairman Ben S. Bernanke has deployed the most aggressive monetary policies since the central bank’s founding nearly a century ago as he battled the 2007-2009 financial crisis, helped pull the U.S. out of the worst recession since the 1930s and then sought to keep the expansion going.

The Fed lowered its target interest rate to zero in December 2008 and undertook two rounds of large-scale asset purchases that swelled its balance sheet to almost $3 trillion from less than $900 billion in December 2007, when the recession began.

Unlike the first and second rounds of quantitative easing, yesterday’s program has no end date. Bernanke declined to provide specific estimates of what economic conditions would prompt the Fed to act or how long the purchases might last.

The MSCI All-Country World gained 3.7 percent in the month after Fed announced its first quantitative easing program on Nov. 25, 2008. The gauge advanced 0.8 percent in the month after the declaration of the second plan on Nov. 3, 2010.

-- Editors: Darren Boey, Allen Wan

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