Global equity funds snap two-week outflow as AI optimism returns

Sept 25 (Reuters) – Global equity funds attracted the most inflows since early July in the week to September 25, snapping a two-week selling streak as enthusiasm around artificial intelligence and a pullback of oil prices outweighed a sharp rise in government bond yields.

Investors bought a net $44.1 billion of global equity funds, their largest weekly net purchase since July 8, LSEG Lipper data showed.

Demand for technology-sector funds was buoyed by strong consumer uptake of Meta’s Muse agent, which topped US app download rankings. Record South Korean exports in the first 20 days of September, driven by surging semiconductor shipments, also reinforced optimism around chip demand.

Goldman Sachs strategists said this week that AI investment was driving almost half of S&P 500 earnings-per-share growth this year.

The resurgence in equity demand came even as a selloff in government debt pushed borrowing costs sharply higher. The 30-year US Treasury yield climbed to a 22-year high of 5.5016% on Thursday as stronger economic data and expectations of further Federal Reserve tightening drove investors to reassess the outlook for interest rates.

US equity fund inflows surged to a three-month high of $37.6 billion during the week. European and Asian equity funds also recorded weekly net purchases of $2.26 billion and $2.21 billion, respectively.

Among sectoral funds, technology funds attracted $5.29 billion – the largest weekly net inflow since July 29. Investors also added $804 million to healthcare funds and $492 million to consumer discretionary funds.

Global bond funds recorded net weekly inflows of $9.68 billion, following a marginal outflow of $73.58 million in the previous week.

Short-term bond funds and loan-participation funds posted notable inflows of $2.5 billion and $1.4 billion, respectively. Government bond funds, meanwhile, registered net outflows of $1.47 billion, ending a two-week streak of inflows.

Investors continued to pull money from money market funds for a second consecutive week, with net sales totaling $605 million.

In the commodity fund segment, gold and other precious metals funds attracted $885.6 million, marking their 10th weekly inflow in the past 11 weeks. Investors also recorded net purchases of $89.26 million in energy funds.

In emerging markets, investors poured $548.99 million into bond funds, reversing net sales of $158.22 million in the previous week. Equity funds also recorded a marginal weekly inflow of $29.3 million after two consecutive weeks of outflows, data for a combined 29,018 funds showed.

(Reporting by Gaurav Dogra; with additional reporting by Patturaja Murugaboopathy in Bengaluru; editing by Philippa Fletcher)