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U.S. fund investors steer clear of domestic stocks -ICI

NEW YORK, July 19 (Reuters) - Cash gushed into taxable bonds and international stocks from U.S. fund investors for a 32nd straight week, according to Investment Company Institute (ICI) data on Wednesday, creating a hurdle for domestic stocks. World stock mutual funds and exchange-traded funds tracked $4.4 billion moved into taxable-bond funds, ICI said. Domestic equity funds bounced back from $11.6 billion in withdrawals the week prior but remained out of favor. The funds' $2.1 billion in withdrawals during the seven days ended July 12 marked a fourth straight week of withdrawals, according to ICI. Domestic stock funds have only attracted money in four of the last 15 weeks. Leo Acheson, senior analyst at Morningstar Research Services LLC, said investors want to be in stocks but are looking abroad for better bargains. The U.S. stock market trades at a 23.6 price-to-earnings ratio, elevated compared with European, Japanese, emerging markets and a global average, according to Thomson Reuters data. An offshoot of the MSCI ACWI index that includes 46 countries other than the United States has returned 2.7 percent this month, ahead of the 2 percent gain of the S&P 500. This year, the 17 percent gain for the foreign country index outpaces the 11.5 percent of the S&P 500. "U.S. equities have really led the way for a long time, but that trend has actually begun to reverse," said Acheson. If the gain holds, 2017 will be only the third year in the past decade that the foreign stocks have beaten U.S. stocks. Meanwhile, fund investors' demand for bonds is proving tireless even though the U.S. 10-year debt benchmark has not delivered a yield above 3 percent since January 2014. Acheson said rates are nonetheless higher than they were a year ago and that more Americans are retiring from work, leading to a preference for more stable assets like bonds. The following table shows estimated ICI flows for mutual funds and exchange-traded funds (all figures in millions of dollars):

7/12 7/5 6/28 6/21 6/14/2017 Equity 3,018 -6,478 2,143 684 27,159 -Domestic -2,118 -11,551 -4,571 -7,876 19,492 -World 5,136 5,073 6,714 8,560 7,667 Hybrid -688 -481 -614 -488 -813 Bond 4,780 5,825 5,404 6,313 7,621 -Taxable 4,438 6,073 4,460 5,391 7,045 -Municipal 341 -248 943 922 576 Commodity -249 -583 394 90 65 Total 6,861 -1,717 7,327 6,600 34,033

(Reporting by Trevor Hunnicutt; Editing by Andrew Hay)