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FUND FLOWS: Investors Still See Opportunity In Emerging Equities

Funds took in fresh money for the eighth straight week.

EPFR Global-tracked Emerging Markets Equity Funds took in fresh money for the eighth week running during the seven days ending May 10, although the week did see the end of the longest run of retail inflows since the first quarter of 2013. The bulk of the inflows were absorbed by the diversified Global Emerging Markets (GEM) Equity Funds, with Asia ex-Japan Equity Funds extending their longest inflow streak in over four years while the other major regional groups — EMEA and Latin America Equity Funds — ­recorded modest outflows.

Among the Asia ex-Japan Country Fund groups, Korea Equity Funds suffered further redemptions during a week when Moon Jae-in won the presidency vacated by Park Geun-hye after her impeachment. Although he campaigned as an economic and political reformer, investors are waiting for more details about his plans for shaking up Korea’s big corporations and defusing relations with North Korea before jumping back into this market.

Investors and fund managers are also being cautious when it comes to Vietnam, whose 6 percent plus GDP growth is beginning to expose some of the country’s shortcomings when it comes to regulatory oversight, credit allocation and the rule of law. Vietnam Equity Funds have posted outflows 10 of the past 11 weeks despite an average performance gain of 5 percent over that period. Allocations for Vietnam among Frontier Markets Equity Funds, meanwhile, have fallen to an eight-month low.

 

Frontier Markets Equity Funds fund managers are also cutting their exposure to Morocco, with allocations to this EMEA market now at a 12-month low. But Morocco Equity Funds recorded their biggest inflow on record as investors focused on a market that is attracting plenty of direct foreign investment and growing at more than 4 percent.

Flows to Latin America Equity Funds suffered in early May as efforts by Chinese regulators to keep Chinese growth on an even keel curb the pricing power and access to credit of some Chinese firms. That is raising questions about Chinese demand for raw materials such as copper and Chile Equity Funds posted their biggest weekly outflow since the fall of 2015.

Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.

TAGS: Mutual Funds
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