By Trevor Hunnicutt
NEW YORK (Reuters) - Mutual fund investors showed a flash of optimism after a year of fleeing risky assets, putting the most money in U.S.-based emerging-market products since April 2015 during the latest week, Investment Company Institute data showed on Wednesday.
The emerging-market funds took in $830 million during the week that ended May 18. Over the prior 12 weeks, the funds lost $2.6 billion to withdrawals, according to the trade group's data.
"It is surprising to see emerging markets were the rare bright spot among equity funds as investors need to stomach great risk in strategies focused on China, India and other less developed markets," said Todd Rosenbluth, director of exchange-traded and mutual fund research at S&P Global Market Intelligence.
The fund buying came as markets upped their expectations of an interest rate hike by the U.S. Federal Reserve, a potential risk for emerging markets.
Yet the global stock fund growth blunted a pattern of withdrawals for stock funds overall that has lasted the better part of the last year. Investors pulled $1.2 billion from U.S.-based stock funds during the latest week, the data showed.
Bond funds stretched their streak of inflows to 12 consecutive weeks as buyers snapped up more relatively low-risk debt ahead of a potential rate hike. U.S.-based bond funds took in $3.7 billion, including $2.2 billion into municipal bond funds, their best number this year.
Investment-grade bond funds, tracking high-credit issuers, pulled in $2.6 billion, compensating for outflows from riskier high-yield and global debt products.
"Prospects for a near-term rate hike have increased creating uncertainty for bond investors," said Rosenbluth.