INVESTORS betting on a delay to U.S. policy tightening put new money into emerging equity and bonds funds for the first time in at least three months while global stocks saw the first inflow in four weeks, Bank of America/Merrill Lynch (BAML) said Friday.

    Data from BAML, which also include figures from Boston-based fund tracker EPFR Global, showed equities and bonds had both received inflows in the week to Oct. 14. While demand grew for riskier junk-rated and emerging debt, government and Treasury bond funds saw small outflows, the first in 15 weeks.

    “EM is back. The collapse in Fed hike expectations gave oversold junk a bid,” BAML said, noting this was the first sign of rotation to “weak dollar” plays such as commodities, emerging markets, and industrial stocks.

    Weak U.S. jobs data increased chances that the U.S. Federal Reserve would not raise rates in December and minutes of its last meeting reinforced this, sparking a rally in emerging assets and stocks and driving a dollar index to six-week lows.

    BAML said global equity funds had received US$2.6 billion, the first inflow in four weeks while bond inflows of US$3.8 billion were the largest in 12 weeks.

    Emerging equity funds which have shed around US$60 billion year-to-date, enjoyed their first inflows in 14 weeks, albeit just US$700 million, while emerging debt received US$400 million, the first inflow in 12 weeks, the report said.

    Chinese equity fund inflows hit a 14-week high, according to EPFR.

    “Although the recent run of outflows from EM equity funds has arguably pushed into excess territory, and is hence sending a contrarian ‘buy’ signal, it is the more benign interpretation of China’s growth trajectory that is having the biggest impact on flows,” EPFR Global said in a separate note.

    U.S. equities, another category that has suffered this year from Fed hike expectations, took in US$700 million, though this was down to exchange traded funds (ETFs) with mutual funds continuing to see losses.

    European stocks continued their run of gains, with US$3.1 billion in inflows, but Japanese equity funds lost another US$1.6 billion, adding to the previous week’s US$2 billion outflow.

    Investors also returned in force to lower-grade debt, which BAML termed “junk-on.” Dedicated high-yield, or junk, bond funds absorbed US$2.6 billion, the largest in eight months, it said.

    Money market funds, a proxy for cash, took in US$5 billion, a fraction of the US$53 billion received during the previous week.(SD-Agencies)