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FUND FLOWS: Money Pours Into Brazil Equity Funds

Biggest weekly inflow since 2014 as investors pin hopes on commodity revival and political reform, according to EPFR Global data.

Flows into EPFR Global-tracked Emerging Markets Equity Funds slowed during the third week of February but remained positive, extending this fund groups longest inflow streak since an 11-week run ended in mid-September. Firmer commodities prices and expectations that the U.S. Federal Reserve will not hike rates until June at the earliest propelled a number of benchmark EM indexes to multi-year highs. EMEA Equity Funds saw their 14-week inflow streak come to an end and Asia ex-Japan Equity Funds also experienced outflows that were offset by flows into Latin America, and the diversified Global Emerging Markets (GEM Equity) Funds.

In contrast to the previous week, only two of the four Country Fund groups dedicated to BRIC markets took in fresh money. Brazil Equity Funds recorded their biggest inflow since early 4Q14, and dedicated BRIC Equity Funds posted consecutive weekly inflows for the first time in over five months.

Brazil Equity Funds are benefiting from expectations that consistent growth in the China, Europe and the U.S. (with hopes of more from the latter) will underpin demand for its commodity exports. Latin America’s largest market also offers a reform story, as does its Mercosur partner and fellow commodities exporter, Argentina. Flows into Argentina Equity Funds hit a 15-week high as improving crop forecasts, and the progress of key wage negotiations provided hope that the central bank’s inflation goals can be met.

Although Russia Equity Funds extended their inflow streak, the total committed to this fund group was the smallest since early November. Rumors that Russia will follow India’s lead in cracking down on the informal economy gave investors pause for thought—India is still recovering from the disruption caused by its "demonetization" initiative—as did fresh doubts about the recovery in oil prices.

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

TAGS: Mutual Funds
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