Investors dumped stocks and fled for the safety of bonds in the week to Jan. 6 which saw $2.3 trillion wiped off global equity markets and the worst opening week for the S&P 500 index, Bank of America/Merrill Lynch (BAML) said on Friday.
Some $8.8 billion was pulled from equities, the largest outflow in 17 weeks, with the redemptions mainly concentrated in U.S. equity funds after the S&P 500 lost 4.9 percent in the first four trading days of 2016.
High quality government, municipal and investment grade bond funds were the big gainers, with some $3.3 billion of inflows. This was the highest in 11 weeks according to BAML's data, which also includes numbers from Boston-based research house EPFR Global.
Investors have taken fright at the huge volatility in equity markets in the first few trading days of 2016, with developed and emerging stock markets in freefall following turmoil in Chinese mainland markets and a sharp move lower in the yuan.
More than 40 percent of the stocks in the benchmark S&P 500 are now 20 percent or more off their highs, the definition of a bear market. BAML estimated the global market cap loss at $2.3 trillion over four days of selling.
The benchmark emerging markets index has plummeted to 6-1/2-year lows, and is on course for a weekly loss of 6.5 percent, its worst weekly performance since May 2012. Investors pulled some $500 million from EM equity funds in the week to Jan. 6, the 10th straight week of outflows.
But BAML said the panic selling had not extended across all equity funds, with Europe and Japan funds attracting a combined $2.2 billion of inflows.
"Redemption pressures continue and are broadening too, but weekly flows do not indicate mass investor capitulation," BAML said.
Investors added $1.9 billion to investment grade bond funds, the largest inflows in five weeks, $900 million to government bond funds, and $1.1 billion to municipal bond funds, the biggest inflows in a year.
There were also modest inflows of $400 million to emerging market debt funds - the second straight week of inflows after outflows in 21 of 22 weeks.