By Helen Reid
LONDON (Reuters) - Investors pulled billions from equities this week, shifting into bonds and high dividend-yielding sectors as Turkey's currency crisis sparked a global selloff and emerging markets entered bear territory, an analysis of fund flows showed on Friday.
The market was shifting into defensive mode, Bank of America Merrill Lynch (BAML) (N:BAC) strategists said, noting investors pulled money out of U.S. equities, technology and financials.
Global equities suffered $3.6 billion of outflows while bonds saw $2.3 billion inflows as investors moved out of riskier assets, the BAML strategists said, citing data from EPFR, a fund flows data provider.
U.S. equity funds saw outflows of $2.6 billion, a turnaround from the previous week when U.S. funds were leading in terms of inflows. Funds investing in large-cap stocks were the main victims of selling, with $2.3 billion lost.
Tech funds had $500 million of outflows, their biggest since the February global market selloff, in a sign of increased caution around the sector which drove much of last year's stock market gains and accounts for 30 percent of MSCI's emerging markets index (MSCIEF).
China's Tencent (HK:0700) this week slipped after reporting its first quarterly profit decline in nearly 13 years, sparking renewed concerns the tech boom may be slowing.
Cumulative flows into the sector were showing signs of peaking, too, strategists said.
HEALTHCARE PREFERRED
Financials saw $1.2 billion of outflows while energy funds lost $600 million, another sign of investors' growing caution over sectors more correlated with the business cycle.
Defensives such as consumer staples, utilities, real estate, healthcare and telecoms, seen as safer for their high dividend payouts, have been the top-performing U.S. sectors for the past three months.
Healthcare stocks drew $800 million of inflows this week, driving the total to $5.5 billion over the past three months and making the sector one of the most "overbought" according to BAML.
Pressure on European equities was unrelenting: Europe had its 23rd straight week of outflows with $2.9 billion pulled from the region's equity funds. Japan, meanwhile, was the sole region to see inflows, with $300 million.
In a week where MSCI's emerging markets index entered bear territory, down 20 percent from the January peak, EM equity funds saw just $200 million of outflows, while $500 million left EM debt funds.
Bear markets were multiplying with European banks, European autos and copper in that category.
BAML strategists also noted more than half the stocks in MSCI's world index <.dMIWD00000PUS> (1,254 out of 2,273) are in bear territory. By contrast overbought assets were U.S. equities and U.S. high-yield bonds, as well as healthcare stocks.
Most oversold were European credit, global financials and materials stocks, as well as Italy, China and Turkey.
The Turkish lira was by far the worst-performing currency, while Turkish equities were 42 percent below their 200-day moving average.