European equities exodus continues benefiting EM bonds and commodities

European equities are bearing greatest share of the burden in terms of fund flows in the aftermath of the UK referendum that has raised the prospect of Britain becoming the first country to exit the economic and political bloc. In the aftermath, last week bonds have seen the fastest inflows in at least 74 weeks. The biggest beneficiary has been emerging market bond funds, which registered their largest ever weekly inflows at least since 2004, according to EPFR. Investors poured in $3.42 billion into EM bond fund last week. Government bond funds attracted $3.3 billion. The Investment grade corporate bond fund attracted $2.7 billion of inflows.

A bigger beneficiary has been the commodity funds last week, which registered inflows of more than $4.3 billion. This is the biggest inflows ever since the record began in 2005. Biggest individual commodity beneficiary has been gold funds, which registered inflows of $2.8 billion.

In contrast, $4 billion was pulled out of European equities that erased all the cumulative inflows in last one year. This year almost $60 billion has been pulled out of the European equities biggest outflows since the 2008/09 crisis.

The trend is very much likely to continue for the rest of the year.