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FUND FLOWS: Emerging Market Funds Hold Up Despite Global Tensions

Emerging markets equity funds took in fresh money last week, despite tensions from Syria’s civil war and North Korean saber-rattling.

Flows into EPFR Global-tracked Emerging Markets Equity Funds held up during the seven days ending April 12, despite the heightened tensions stemming from Syria’s civil war and North Korea’s nuclear saber-rattling. Collectively, this fund group absorbed fresh money for the 12th time in the past 14 weeks. Retail flows were positive for the second week running, the first time that has occurred since early 4Q16, and commitments to Asia ex-Japan Equity Funds reached their highest weekly total in over a year.

Among the Asia ex-Japan Country Fund, groups attracting fresh money were Korea Equity Funds, with domestic investors shrugging off the tensions between North Korea and the U.S. and using the sharp drop in South Korean equity prices triggered by the latest standoff to build up positions cheaply. Won denominated flows were the biggest since late November while foreign currency denominated flows were negative for the eighth week in a row.

Mutual fund investors showed more caution when it came to Turkey, which is heading into a contentious constitutional referendum at the same time the civil war in neighboring Syria has taken another twist that puts the U.S. and Russia at loggerheads. Turkey Equity Funds recorded outflows for the sixth straight week and the eighth time in the past 10. But technical analysis of Turkey’s equity market by EPFR Global sister company Informa Global Markets (IGM) suggests that it offers value and that its benchmark index, the XU 100, is likely to make a run at its 2013 record high.

Latin America Equity Funds saw money flow out again after two weeks of inflows with Brazil Equity Funds recording outflows for only the second time in the past 14 weeks ahead of a central bank meeting that ended with the biggest interest rate cut since 2009. While Brazilian rates are heading down, however, monetary policy in China – a key source of demand for Latin America’s commodities exports – is being tightened to head off potential real estate bubbles and limit domestic capital flight.

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

TAGS: Mutual Funds
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