Nomura: Inflows into US assets slow as bond funds see outflows while equity funds continue to attract net subscriptions

Why did inflows into US funds nearly halve?

From 19 October to the 23rd, US-focused ETFs and mutual funds attracted combined net foreign inflows of 650 million dollars, down from approximately 1.3 billion dollars the previous week. The main change came from bond funds, which shifted from net inflows of 196 million dollars the previous week to net outflows of 405 million dollars, directly reducing combined equity and bond inflows.
Equity funds still recorded net inflows of approximately 1.1 billion dollars during the week, broadly unchanged from the previous week. However, new money was weaker than the average weekly inflow of 1.8 billion dollars over the preceding 12 weeks. The decline in the weekly total and equity buying below its recent norm are therefore two different comparisons.
Nomura uses US-focused funds listed on exchanges outside the US as a proxy for foreign flows, on the assumption that their investors are primarily non-US retail investors. The data reflect subscriptions and redemptions through specific fund channels and cover a different universe from all cross-border securities transactions.

As of 23 October, US-focused funds had recorded cumulative net inflows of approximately 6.7 billion dollars in October, including approximately 6.2 billion dollars into equity funds, already above the 3.5 billion dollars recorded for all of September. While the latest week slowed, cumulative buying during the month remained primarily supported by equities.
Bond funds performed less strongly over the month: net inflows in October so far were approximately 500 million dollars, below approximately 1 billion dollars for all of September. The month-to-date and full-month windows differ, but the divergence between equities and bonds is clear: cumulative equity inflows have exceeded the previous month's total, while bond inflows remain below it.

South Korean retail investors made net purchases of approximately 1.2 billion dollars in US equities and bonds combined during the week, down from 3 billion dollars the previous week. Equities accounted for approximately 1 billion dollars in net purchases and remained the main destination. However, combined net purchases of 6.3 billion dollars in October so far have exceeded the 2.4 billion dollars recorded for all of September; the short-term slowdown followed strong buying earlier in the month.
Taiwan-listed US dollar bond ETFs recorded net outflows of 601 million dollars during the week, compared with net inflows of 59 million dollars the previous week, showing a shift from subscriptions to redemptions in this channel. Cumulative net inflows in October so far remained at 265 million dollars, but were below the 624 million dollars recorded for all of September.

Emerging market-focused ETFs recorded net inflows of approximately 1.8 billion dollars during the week, close to the previous week's 1.7 billion dollars. Equity funds accounted for approximately 1.5 billion dollars and bond funds for approximately 300 million dollars. Compared with the decline in total inflows into US-focused funds, this channel continued to attract relatively stable flows.
In October so far, emerging market-focused funds have recorded cumulative net inflows of approximately 3.9 billion dollars, above approximately 1.2 billion dollars for all of September. Nomura uses relevant funds listed outside emerging markets as a proxy for foreign flows, assuming they are mainly held by foreign investors. The data show differences in the strength of flows to different destinations, rather than a uniform trend of capital withdrawal.