Emerging markets outflow strongest since January

Vietnam, where the benchmark equities index fell 22% in the second quarter, has posted inflows for 10 of the past 14 weeks on bargain hunting, says EPFR Global.
Emerging market equity funds posted a net outflow of $4.3 billion last week, the fourth straight week of net redemptions, as investors pulled money out of all the major fund groups including the previously resilient Europe, Middle East, and Africa (Emea) equity funds, according to EPFR Global, which tracks around $10 trillion in assets in traditional and alternative funds worldwide.

Last week marked the worst week for emerging market equity funds since they lost $10.7 billion in outflows during the third week of January.

Outflows from the diversified global emerging markets (GEM) and Asia ex-Japan equity funds both exceeded $1 billion each, with the latter having its second worst week year-to-date, while Latin America equity funds reported outflows of $548 million last week.

Emea equity funds suffered in part because flows into Russia equity funds turned negative after a 10-week, $1.76 billion run of net inflows. The battle for control over oil major BP-TNK has banished much of the recent goodwill generated by new President Dmitry MedvedevÆs remarks in support of property rights and less direct state involvement in the business sector, EPFR Global says.

Asia ex-Japan equity funds, which have now posted outflows for six straight weeks, are being sapped by doubts that many key markets in the region can effectively balance the competing policy goals of a competitive currency for exporters and a monetary policy tight enough to effectively rein in rising inflation.

These concerns have not stopped investors from stepping back in when they believe markets are oversold, however. Funds geared towards Vietnam, whose benchmark equities index fell 22% in the second quarter of 2008, have posted inflows for 10 of the past 14 weeks.

At the country and sub-regional level, Middle East and North Africa equity funds (Mena) extended their notable run, posting inflows every week so far this year, and Vietnam equity funds attracted more contrarian money. But all of the fund groups geared to the Bric (Brazil, Russia, India and China) markets recorded outflows, as did Bric equity funds.

Financial sector funds continued to benefit from rock bottom valuations, hopes for further consolidation and speculation that more sovereign wealth fund money will move into the sector, EPFR Global says. A fifth straight week of positive flows took year-to-date inflows for this group over the $7 billion mark despite owning by far the worst performance numbers of the nine major sector fund groups.
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