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FUND FLOWS: Emerging Markets Funds Rebounded After Early August Pullback

U.S. and North Korea tensions that spooked investors have since calmed

Although retail support crumbled earlier in the month, EPFR-tracked Emerging Markets Equity Funds ended the third week of August by posting inflows for the 30th time in the 34 weeks year-to-date. Tensions between the U.S. and North Korea eased and expectations about the pace of U.S. monetary tightening veered back towards glacial. For the second week running Asia ex-Japan Equity Funds recorded the biggest inflow among the four major groups while EMEA Equity Funds chalked up their 22nd consecutive outflow.

Korea Equity Funds again led the way among Asia ex-Japan Country Fund groups as investors took advantage of the valuations created by the sell-off at the height of the rhetorical salvos flying between U.S. President Donald Trump and North Korean leader Kim Jong Un. Investors see less value among Indian stocks, which hit fresh record highs in late July on the back of a decent monsoon rains season, ongoing reforms and anticipation of the first cut in domestic interest rates since last fall. India Equity Funds posted outflows for the second week running.

Latin America Equity Funds posted net redemptions for the third straight week as both of the region’s biggest economies, Brazil and Mexico, remain under pressure. In the case of Brazil, which is struggling to emerge from its worst recession on record, ongoing corruption probes and elections next year continue to raise questions about economic policymaking while doubts about the future of NAFTA and elections in 2018 sap investor interest in Mexico. But Colombia Equity Funds attracted fresh money for the 11th straight week as investors respond to the country’s accelerating economic growth and its efforts to resolve the long-running conflict with guerrilla groups.

Investors looking to EMEA markets continue to struggle with political trends in many markets and the impact low oil prices are having on the economies of Russia, Nigeria and other producers in the Middle East and Africa. At the country level, redemptions from South Africa Equity Fund hit a nine week high as investors stepped back from an economy where both business and consumer confidence are at low ebbs and a credit rating teetering on the edge of junk status constrains the government’s ability to stimulate the economy.

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

TAGS: Mutual Funds
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