Global mutual funds investors could sell $350 bln worth equities this year -Barclays

The brand of Barclays financial institution is seen on glass lamps outdoors of a department of the financial institution within the Metropolis of London monetary district in London September 4, 2017. REUTERS/Toby Melville

Might 25 (Reuters) – Barclays mentioned on Wednesday world mutual funds buyers may promote equities price an extra $350 billion this yr, except fears of recession diminish, on account of an unsure macro backdrop and financial coverage tightening.

Buyers have been promoting equities within the wake of rising inflation, prompting economies to hike rates of interest. Russia’s invasion of Ukraine added to the inflationary pressures amid a surge in vitality and commodity costs, growing prices to firms because it damage their valuations together with volatility in world monetary markets.

Barclays mentioned fairness outflows amounted to a median of two.6% of mutual funds’ property beneath administration (AUM) in earlier intervals of main inventory promote offs, such because the Nice Monetary Disaster of 2008-09, in comparison with 0.3% this yr, which suggests one other $350 billion of fairness sell-off is forthcoming this yr except recession fears diminish.

Mutual funds buyers have been internet sellers of equities this month, for the primary time since August 2020, although fairness outflows are tiny in comparison with the report $1.3 trillion inflows since 2020, Barclays mentioned.

“Each financial momentum and EPS revisions momentum have turned destructive, which suggests the path of journey is probably going in direction of extra (fairness) outflows, though the magnitude is unclear at this stage,” the brokerage added.

Barclays believes the patron outlook is unlikely to get any higher if the U.S. Federal Reserve will get extra aggressive on financial coverage, though revenue and enterprise fundamentals look supportive for now.

Nerves a few world recession have been jangled on Tuesday by weak U.S. housing market information and the U.S. Federal Reserve has vowed to behave aggressively by mountaineering the price of borrowing and minutes from its most up-to-date assembly, which is due later. learn extra

The brokerage continues to see the U.S. to be extra susceptible to additional fairness promoting than the European Union, given increased valuations.

(This story corrects to Wednesday from Friday in paragraph 1.)

Reporting by Siddarth S in Bengaluru; Modifying by Krishna Chandra Eluri

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