Flows into EPFR Global-tracked Emerging Markets Equity Funds continued to tilt towards those with Emerging Asian regional mandates in late April, with Asia ex-Japan Equity Funds posting inflows for the fifth straight week — their longest run since late 3Q14 — as Korea and China reported better than expected 1Q17 GDP numbers and the IMF upgraded its forecast for Indian growth during the current fiscal year.
The latest industrial allocations data for Asia ex-Japan Equity Funds suggests that managers are still unsure which businesses will benefit from this trend. In early April, average cash allocations stood at a 13-month high and weightings for many industries related to manufacturing were flat or declining.
At the country level, both China and Korea Equity Funds posted outflows despite the latest macroeconomic numbers. In the case of China, investors remain fearful that the government’s focus on financial stability will translate into less domestic support for China’s equity markets. South Korea, meanwhile, is preparing for the election called to choose the successor to impeached former president Park Geun-hye while North Korea continues to issue dramatic threats about its willingness to use its nuclear weapons. Flows into Philippine Equity Funds did hit a 15-week high, with economic growth in that country running at over six percent.
Among the Latin America Country Funds, those dedicated to Brazil recorded their biggest outflow since late 2Q16. Concern that lenders are not passing on the central bank’s recent rate cuts and the effect of a widespread corruption probe, now in its third year, on the government’s ability to press forward with reforms are among the factors driving the outflows from Brazil Equity Funds. The bulk of the latest redemptions were foreign: real-denominated flows have been positive four of the past six weeks.
Turkey Equity Funds saw a seven-week outflow streak come to an end, with inflows hitting their highest level since late January, as investors moved to capture the rebound in Turkish equities they anticipate now that a contentious constitutional referendum is done and dusted. Retail commitments to this fund group gained momentum for the fourth straight week, climbing to a 37-week high.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.