U.S. fund investors less skittish on international stocks

Traders work on the floor of the NYSE

By Trevor Hunnicutt

NEW YORK (Reuters) – Investors galloped into stocks for the third straight week, delivering U.S.-based funds invested in companies abroad the most cash since August 2015, Investment Company Institute data released on Wednesday show.

World stock funds attracted $5.3 billion, the most since August 2015, the trade group said, as investors built up bets in relatively low-priced markets.

“There is a perennial value investor who recognizes that we’ve had one of the biggest gaps in relative performance over the last 5 years between the U.S. and internationally that we’ve had,” said Rod Smyth, chief investment strategist at RiverFront Investment Group LLC.

“Maybe this will be the year where they finally keep up or do a little better.”

Investors could be excused for showing skepticism. In the ten years through 2016, the S&P 500 gained 6.9 percent a year. The MSCI ACWI index, which includes the United States and 45 other countries, gained just 4.1 percent a year over that period.

Investors who snapped up international stock funds in 2015 were met with an oil price collapse and a Chinese currency devaluation that August. In more recent months, concerns over Britain’s exit from the European Union and Japanese monetary policy have weighed on the funds.

After pouring $203 billion into the funds in 2015, investors pulled $4.4 billion last year, according to ICI.

Returns have picked up in recent months, with the MSCI ACWI gaining 12 percent since July and charting new records.

Economic data this month in China showed inflation, imports and exports all gaining steam, helping commodity prices and offering new evidence that the global economy is building momentum.

Investors poured $1.5 billion into emerging market stock funds during the latest week, earlier data from Thomson Reuters Lipper showed, marking the funds’ seventh straight week of inflows and the biggest haul since last August.

At the same time, many investors are pointing to the European and Japanese stock markets as offering a bargain.

But Smyth said the gains or price momentum in international stocks still have not been impressive compared with domestic markets.

“The value side is pulling us toward international markets, and the momentum side is saying, ‘Em, not yet,'” he said.

U.S.-based equity funds overall attracted more than $13 billion during the week through Feb. 15, according to the ICI. U.S.-based bond funds attracted $8.6 billion, their eighth straight week of inflows.

(Reporting by Trevor Hunnicutt; Editing by Meredith Mazzilli)