Global funds are flowing out of bond funds as well as stock funds amid the spread of COVID-19.
According to Emerging Portfolio Fund Research, a total of US$38.47 billion flowed out of global bond funds this month alone. Earlier this year, bond funds investing in advanced markets attracted US$13 billion to US$20 billion a week, resulting in a bullish bond market. When it comes to emerging bond funds, the weekly inflow used to be approximately US$1 billion in January and the inflow was maintained in spite of a slower pace in the next month.
This month, however, capital outflow is accelerating. A total of US$7.76 billion and US$18.94 billion flowed out of the former bond funds until March 4 and 11, respectively. During the same periods, US$4.81 billion and US$6.96 billion flowed out of emerging bond funds with the number of confirmed COVID-19 infections soaring in Europe in particular.
As for stock funds, US$27.8 billion flowed out of the market this month alone. Investors are hoarding cash to avoid uncertainties and a shortage of liquidity is likely to be accelerated for a while as they are shunning every investment product regardless of how risky it is.