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FUND FLOWS: Political Corruption in Brazil Hurts Fund Flows

Investors are also discounting President Trump’s ability to push through his protectionist economic agenda.

Asia ex-Japan Equity Funds recorded their biggest inflow since early in the third quarter of 2015 and the diversified Global Emerging Markets (GEM) Equity Funds took in fresh money for the 19th consecutive week in mid-May, as investors discounted U.S. President Donald Trump’s ability to push through his protectionist economic agenda. Latin America and EMEA Equity Funds, however, posted outflows for the fourth and eighth consecutive week respectively.

At the country level, Mexico Equity Funds, helped by moves to extend oil production curbs (thereby keeping a floor under prices) and the dwindling political capital of a U.S. president opposed to NAFTA and open borders, recorded their biggest inflow since mid-December while snapping a nine-week outflow streak. Meanwhile, flows into Brazil Equity Funds were negative for the sixth straight week. The reporting period ended before fresh allegations of corruption against reformist President Michel Temer sent Brazil’s equity markets tumbling.

In Asia, the election of a president promising reforms and clean government saw Korea Equity Funds record their biggest inflow in over 15 months. Won-denominated flows to a handful of domestically domiciled ETFs accounted for most of the headline number, which came the week after Moon Jae-in won the office previously held by Park Geun-hye who was impeached for corruption. Moon’s agenda includes increasing the number of public sector employees, reforming education, cracking down on environmental abuses, expanding Korea’s welfare system and reining in the big conglomerates that dominate Korea’s economy.

Among the EMEA Equity Country Fund groups, those dedicated to Turkey posted outflows for the 10th time in the past 11 weeks. Investors redeemed money from Russia Equity Funds for the sixth straight week despite expectations that the price of oil, the cornerstone of the country’s public finances, will be supported by an extension of the existing agreement with OPEC to curb production.

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

TAGS: Mutual Funds
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