Investors rush to cash as market volatility soars - BAML

By Jamie McGeever LONDON (Reuters) - Investors poured more than $7 billion into the safety of cash assets last week, seeking protection from the volatility and mounting deflationary forces sweeping through financial markets, Bank of America Merrill Lynch (BAML) said on Friday. That was the largest single flow in or out of any asset class tracked by the bank in the week to Jan. 27 and lifted the year-to-date inflow to $16 billion. Investors have ploughed $208 billion into cash since the middle of last year, making it the most popular asset class by far, the bank said in its weekly report. That compares with a $7 billion inflow for equity funds and a $46 billion outflow from fixed income, thanks largely to hefty redemptions from credit funds, which have been among the hardest hit by the global market turmoil. Many stock markets around the world last week entered bear market territory, down 20 percent or more since worries over Chinese growth, tumbling oil prices and the impact of expected rises in U.S. interest rates rattled investors. This January will be the worst start to a year in decades for many markets and the worst on record for some. Despite the deepening gloom, however, equity funds managed to attract a small $37 million net inflow in the week to Jan. 27. U.S. equity funds posted a $2.9 billion outflow, the seventh outflow in the past eight weeks, and emerging markets stock funds posted their 13th consecutive weekly outflow, this time $1.2 billion. That was balanced by a small $400 million inflow for Europe -- the 16th in 17 weeks -- and the ninth consecutive flow into Japanese equities, of $2.7 billion, said BAML, which also uses data from fund research house EPFR Global. Overall, investors have pulled $24.2 billion from equity funds so far this year. Government and Treasury bond funds drew in $2 billion, marking the fourth consecutive weekly inflow, while emerging market bond funds posted yet another outflow, down by $700 million. Reflecting growing disinflationary pressures as oil prices plunged to a 12-year low below $30 a barrel, investors pulled $400 million from inflation-protected bond funds, the largest outflow in 33 weeks. Overall, however, commodity funds attracted $900 million, the fourth consecutive weekly inflow, BAML said. (Editing by David Goodman)