LONDON (Reuters) - Investors stormed out of bonds, equities and every other major asset class this week and piled a record $136.9 billion into cash, according to BofA’s weekly flow data, as panic about the spreading coronavirus wiped trillions of dollars off the value of global markets.
From stocks to precious metals, oil to bitcoin, positions across all these sectors were liquidated as panicky investors rushed to raise cash - seen as the safest option at a time when a global economic recession threatens and every asset class is in turmoil.
The other well-known safe-haven, gold, saw a lesser $3.1 billion of inflows.
“What initially started as a market stress episode became a genuine macro shock as the contagion of COVID-19 spread throughout world economies and was no longer contained to China,” said Jeremy Gatto, investment manager at Unigestion.
“We have turned more defensive and have deleveraged the portfolio, moving increasingly towards cash. The unprecedented market dislocations have resulted in defensive assets providing less protection and liquidity to dry up, making cash appealing.”
Analysts at BofA, parsing weekly data from flow tracking specialist EPFR, reported $136.9 billion of inflows into cash - the largest ever. Investors withdrew a record $25.9 billion from bond funds in the week to Wednesday.
Refinitiv Lipper data showed a similar drawdown in stocks and bonds, confirming the preference to hold cash.
BofA dubbed the moves “Fear and loathing”, adding that the “crash reflected fears of economic recession, debt defaults, forced Wall Street liquidations and policy impotence or incompetence.”
That was a reference to authorities’ swingeing interest rate cuts and stimulus measures which have not completely soothed investors’ fears, given the jury is out on how much economic damage the virus will inflict and for how long.
World stocks .MIWD00000PUS rebounded on Friday after huge cash injections were unveiled by the U.S. Federal Reserve and others but they still were set for their worst week since the 2008 financial crisis, following Thursday’s 10% drop.
The capitulation has caused more than $10 trillion in market value losses on world stocks this week alone.
The Institute of International Finance (IIF) noted a “sudden stop” in non-resident portfolio flows to emerging markets, a useful gauge of risk appetite.
“Only a concerted response in terms of testing and containment will be able to mitigate the “fear factor” in markets and jump-start global demand,” IIF said.
(Graphic: Global equities market cap loss - here)
Reporting by Thyagaraju Adinarayan, additional reporting by Karin Strohecker; Editing by Sujata Rao and Susan Fenton