The possibility of solid — but not overheated — growth in the U.S., Japan and Europe increasing demand for emerging markets’ commodity and manufactured exports kept fresh money flowing into Emerging Markets Equity Funds during the fourth week of March.
The diversified Global Emerging Markets (GEM) Equity Funds were again the first port of call for investors, taking in over $1.5 billion as they posted inflows for the 12th consecutive week.
While developed markets investors were committing significant sums to Emerging Markets Equity Funds during 1Q17, investors in those markets were steering their money towards funds with fixed income, multi-asset or alternative mandates.
Asia ex-Japan Equity Funds recorded net inflows for only the second time in the 13 weeks YTD despite more redemptions from China Equity Funds. In the case of China, investors fear that recent tightening by the central bank to keep the lid on property prices will put developers, smaller banks and low margin businesses under stress. India Equity Funds, meanwhile, attracted another $121 million ahead of the new fiscal year which runs from April to March.
Flows into Latin America Equity Funds were also positive as investors continue to rotate from Mexico to Brazil and some of the smaller regional markets. Flows into Brazil Equity Funds climbed to a four-week high with domestic currency flows accounting for nearly half of the headline number. Managers of Latin America Equity Funds are still cutting their exposure to the regions consumer stories: allocations for consumer staples, information technology and consumer discretionary stocks are all currently at more than four-year lows.
EMEA Equity Funds posted outflows for the fifth time in six weeks as investors pulled more money out of Russia Equity Funds and extended Turkey Equity Funds’ longest outflow streak since 3Q16. Turkish voters will decide in mid-April whether to expand the constitutional powers of the presidency currently held by Recep Erdogan. Investors fear that Erdogan will use additional powers to champion a statist model of economic growth driven by public sector imperatives.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.