Money ebbs out from equity funds on escalating U.S.-China trade war

2019.05.14 13:31:49 | 2019.05.14 16:02:29

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Investors pulled out almost 2 trillion won ($1.68 billion) from equity funds in South Korea over the last five trading days as they turn jittery about repercussions from a widening trade war between the United States and China.

Korean equity funds saw outflows of 1.96 trillion won from May 1 to 9, on course to exceed the withdrawal of 2.78 trillion won during the whole month of last October, according to the Korea Financial Investment Association (KOFIA) on Monday. Equity fund outflows reached 2.15 trillion won last month.

Stock markets around the world held their breath as the two economies entered a new round of negotiations Friday, a date set by Washington to trigger tariff hike to 25 percent to additional $200 billion Chinese imports

After talks fell without a deal, the U.S. warned off additional hike on $300 billion worth, which means practically all shipments from China would be levied with maximum 25 percent tariff. Beijing on Monday declared a counterattack by throwing the same 25 percent tariffs on $60 billion worth U.S. imports.

Investors flocked to safer assets amid growing uncertainties.

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Almost all types of equity funds including public offering funds, private equity funds, exchange-traded fund (ETF) and funds investing in foreign stocks have seen capital run this month. The KOFIA said about 37.8 billion won was withdrawn from private funds this month, as investors fled to safer private alternative investment funds due to the weak performance of stocks last year.

ETFs also saw outflows of 843.7 billion won so far this year despite brief inflows into leverage ETFs and inverse ETFs on the back of the increased volatility in the stock market.

Korean stocks fell sharply on Monday in response to the escalated trade dispute, with the benchmark Kospi bourse hitting a four-month low of 2,079.01, down 1.38 percent from the previous session. On Tuesday, Kospi rose 0.14 percent to close at 2,081.84.

By Kim Je-lim and Choi Mira

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