Global equities may see $230 billion inflow by end of March, projects JP Morgan

The MSCI All Country World Index has fallen more than 11 percent so far in the current quarter, while MSCI Emerging Market index has cracked close to 15 percent

The tumultuous March quarter for global equity markets could have a merrier ending than what many expect with a projected deluge of $230 billion.

The sharp drawdown in global equity markets in the three months to March 31 has been triggered by Russia's invasion of Ukraine, prospects of aggressive interest rate hikes by the US Federal Reserve and break-neck acceleration in global inflation.

The MSCI All Country World Index has fallen more than 11 percent so far in the current quarter, while the MSCI Emerging Market index has cracked close to 15 percent in the same period.

However, the slump in global equities and the subsequent spike in global government bond yields could result in a larger-than-usual readjustment in several behemoth multi-asset funds across the world.

"We estimate the potential rebalancing flow for the end of March at around $230 billion out of bonds and into equities from multi-asset investors. This large rebalancing flow should support equity markets into the end of this month," JP Morgan said in a recent note.

The investment bank expects US balanced mutual funds, including the traditional 60:40 funds, which have assets under management (AUM) of $4 trillion, to shift close to $24 billion towards equities in their funds. Similarly, US Defined Benefit Pension plans with an AUM of $7 trillion needs to buy equities worth $124 billion by the end of March to meet its mandated equity allocation.

JP Morgan expects that Norges Bank, one of the world's largest sovereign funds with assets of $1.3 trillion, will need to by equities worth $22 billion by the end of the quarter. "This number does not include any additional equity buying by Norges Bank that would naturally result this year from the expected rise in oil revenues," it said.

GPIF, the pension plan of the Japanese government, will have to invest close to $40 billion in equities to get its equity allocation to back to December quarter levels, JP Morgan said.

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