Investors flee to safe-haven assets on heightened geopolitical risks

Investors’ risk aversion was on display last week as geopolitical tensions sent new money into safe-haven assets such as government-Treasury as well as gold funds, according to Lipper data.
Taxable bond funds attracted $1 billion in new cash to mark their fourth straight week of inflows, with $396 million going into US -based government-Treasury funds, Lipper data in the seven days through April 12 showed.
US-based corporate investment-grade bond funds attracted $96 million in the latest week, continuing their inflow streak since December, according to Lipper.
For their part, non-taxable US municipal bond funds attracted $1.6 billion for the reporting period, the strongest weekly flows since the week ended Dec. 30, 2013, Lipper added.
“Investors are questioning whether the market has gotten a little ahead of itself against the geopolitical risks and concerns with North Korea and Syria and China’s Xi Jinping visit,” said Tom Roseen, head of research services at Thomson Reuters Lipper.
“Treasuries and munis are just a safe-haven play, with the 10-year yield getting pushed down as these safe-haven plays rallied. Interestingly though, munis got a big boost ... maybe because its tax season.” US-based stock mutual funds posted cash withdrawals of $1.2 billion, their third consecutive week of outflows, while US-based stock ETFs saw inflows of $2.5 billion, Lipper said.
Investors in exchange-traded funds are thought to represent the institutional investor, including hedge funds. Mutual funds are thought to represent retail investors.
All told, Roseen said notable last week is “the big net inflows” into international equity funds totaling $4 billion — the largest inflows since Dec. 30, 2015.
Roseen said the European Central Bank did not plan on hiking rates soon and “oil got a little boost from supply concerns after the Syrian air strike. I would have thought the upcoming French elections would have caused people to take a wait-and-see approach.” That said, investors hedge positions with gold, given geopolitical worries.
US-based commodities precious metal funds, which consists of gold futures, posted inflows of $295 million, their second consecutive week for the group, Lipper data showed.

Source: Arab News