Sept 19 (Reuters) - Investors divested equity funds on a

large scale in the week to September 17 to lock in profits as an

extended record-setting rally in global stocks amid an interest

rate cut by the Federal Reserve raised investor caution around

the stock market's lofty valuations.

Investors disinvested a net $38.66 billion worth of global

equity funds during the week in their biggest weekly net sales

since at least 2020, data from LSEG Lipper showed.

"There are reasons to be mindful. Current valuations are

high compared to long-term averages," said Mark Haefele, Chief

Investment Officer at UBS Global Wealth Management.

The MSCI World Index has so far rallied around

35.9% since hitting nearly a 1-1/2 year low of 722.57 on April

7, pushing its forward 12-month price-to-earnings ratio to a

more than 4-year high of 19.9.

"After such a strong recent run, a period of consolidation

should not come as a surprise, in our view," UBS's Haefele said.

Investors withdrew a massive $43.19 billion from U.S. equity

funds, the largest amount for a week since $50.62 billion worth

of net sales in mid-December 2024.

Asian and European equity funds, however, received a net

$2.23 billion and $1.25 billion worth of weekly investments,

respectively.

Equity sectoral funds had a mixed set of data as the

technology sector saw $3.1 billion net sales while investors

snapped up industrials, and gold and precious metals sector

funds of $2.06 billion and $722 million, respectively.

Weekly net inflows in global bond funds, meanwhile, eased to

a 10-week low of $12.2 billion during the week.

Government bond funds still saw a surge in demand as they

received $2.75 billion, the largest amount in 17 weeks. High

yield bond funds also received a significant $2.48 billion.

Meanwhile, money market funds saw a net $9.12 billion

outflow following two successive weeks with close to $60 billion

inflows.

Gold and precious metals commodity funds saw a net $1.69

billion weekly investment, with inflows now recorded for 16 of

the last 17 weeks.

In emerging markets, equity funds were popular for the fifth

successive week as they received a net $2.75 billion weekly

inflow. Investors also scooped up bond funds of a net $850

million, data for a combined 29,666 funds showed.