Investors flee biggest financials ETF at fastest pace since 2008

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NEW YORK (Dec 18): With fears about future economic growth roiling markets, financial firms are falling out of vogue with ETF investors at a pace unseen since the collapse of Lehman Brothers.

The US$24 billion Financial Select Sector SPDR Fund, ticker XLF, had US$1.8 billion of outflows last week, the most since July 2008. The US$24 billion fund has seen investors pull US$4.6 billion this year, fourth most among non-leveraged U.S. equity exchange-traded funds. Its price has fallen more than 10% in December alone.

Concern the economy will buckle under tighter monetary policy and the gradual decline in the quality of lending and has pushed financial stocks into a bear market, accelerating the exodus from the sector. Meanwhile, pessimists are piling in, with the fund’s short interest rising last week to 3.5% of shares outstanding, the most in 15 months.

The S&P 500 Financials Sector Index fell as much as 0.9% Monday, before regaining much of the slide. Goldman Sachs Group Inc was among leading decliners, dropping for a ninth consecutive session as Malaysia filed the first criminal charges against the Wall Street giant in relation to the 1MDB scandal.

Largest financials ETF posts biggest weekly outflow since 2008.