Breakthrough in the Strait of Hormuz Injects Billions into Global Equity Funds

SadaNews Economy - Global equity funds witnessed an unprecedented investment surge, the largest in 19 months, during the week ending June 17, driven by a wave of overwhelming optimism among investors. This strong rebound followed the announcement of a temporary agreement between the United States and Iran, along with positive expectations that the complete reopening of the Strait of Hormuz would stabilize global energy supplies and alleviate inflationary pressures.

Data from the London Stock Exchange Group indicated that investors injected approximately $55.22 billion into global equity funds during the week, marking the largest weekly purchase since November 13, 2024. This came after the United States and Iran signed an agreement to extend the ceasefire announced in April by an additional 60 days, allowing room for negotiations aimed at achieving a more sustainable truce.

The agreement also stipulated the full resumption of maritime traffic in the Strait of Hormuz without fees, which is one of the most important global waterways for oil transport. The closure during the conflict had caused a sharp rise in crude oil prices.

This optimism was clearly reflected in the markets, as U.S. equity funds attracted inflows of $38.37 billion, recording their largest weekly inflow in 19 months. This coincided with record inflows of $21.46 billion into technology sector funds within just one week.

In terms of equity categories, small and mid-cap corporate funds attracted net inflows of $6.52 billion, $5.02 billion, and $1.42 billion, respectively, while large-cap corporate funds recorded net outflows of $6.55 billion. Sector funds also saw strong demand, with industrial sector funds attracting inflows of $2.35 billion, followed by financial funds at $639 million, and metals and mining funds at $586 million.

In the fixed income market, U.S. bond funds continued to attract investments for the ninth consecutive week, recording net inflows of $9.85 billion. Taxable local bond funds and short- to medium-term investment bond funds topped the list of most attractive funds with inflows of $3.4 billion and $3.09 billion, respectively.

Liquidity returned strongly to U.S. money market funds, which attracted net investments of $53.25 billion, reversing a net sell-off of $16.6 billion recorded in the previous week.

European funds attracted investments of $10.66 billion, while Asian funds drew in $3.92 billion.

In terms of sectors, technology funds led the scene with record inflows of $21.46 billion in one week. Industrial sector funds also experienced strong demand, with inflows reaching $2.49 billion, the highest level since March 4.

In the fixed income markets, global bond funds continued to attract investments for the eleventh consecutive week, recording net inflows of $17.17 billion. Corporate bond funds led the way, attracting $2.86 billion, the largest net weekly purchase in two months, while short-term bond funds and euro-denominated funds recorded inflows of $1.44 billion and $1.25 billion, respectively.

Moreover, investors added $40.03 billion to cash market funds, a significant shift compared to a net sell-off of $19.02 billion in the previous week.

Conversely, gold and other precious metals funds continued to face selling pressures for the fifth consecutive week, with withdrawals amounting to $1.78 billion.

In emerging markets, the risk aversion trend continued, with equity funds recording outflows for the eighth consecutive week amounting to $2.88 billion, while bond funds suffered a net weekly sell-off of $309 million, according to data covering 28,869 investment funds worldwide.