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FUND FLOWS: Emerging-Markets Equity, Bond Funds Impacted by Political Tension

Issues of U.S.–North Korea relations cause break in longest inflow streaks since 2013.

Both Emerging-Markets Equity and Bond Funds saw their longest inflow streaks since 2013 snapped during the second week of August, as investors took some year-to-date gains off the table in response to the war of words between the U.S. and North Korea. They also feared that stronger macroeconomic data could strengthen the hand of hawkish U.S. Federal Reserve policymakers.

The latter concern faded after the release of the minutes from the Fed's July meeting, which showed those policymakers devoting plenty of attention to a run of subdued inflation numbers. By then, however, the Emerging-Markets Equity Funds tracked by EPFR had posted their biggest outflow since the final week of 2016, as their 21-week run of inflows came to an end. Meanwhile, Emerging-Markets Bond Funds experienced net redemptions for the first time since late January. Retail investors accounted for the bulk of the EM Equity Fund outflows but were net contributors to EM Bond Funds for the seventh straight week.

Overall, EPFR-tracked Equity Funds saw a net $1.3 billion flow out during the week ending August 16, with outflows from Dividend Equity Funds jumping to a 21-week high, while Bond Funds took in another $3.5 billion and Money Market Funds $1.6 billion.

At the single-country level, India Equity Funds experienced their heaviest redemptions since early January, and outflows from China Equity Funds climbed to a 67-week high. Argentina Equity Funds snapped their longest run of outflows so far this year. Among developed-markets country fund groups, France equity funds extended their longest inflow streak in over 15 years, and commitments to Japan equity funds hit a 20-week high.

Cameron Brandt is director of research for EPFR Global, an Informa Financial Intelligence company.

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