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FUND FLOWS: Euro Has More Bang Than Any North Korean Missile

Japan and South Korean funds continued streaks of new money.

If mutual fund flows were among the targets that Kim Jong-un hoped to hit when he authorized the launch of a Hwasong-12 missile that flew over Japan, the North Korean leader ended the fourth week of August a disappointed man. EPFR-tracked Japan Equity Funds took in fresh money for the seventh straight week, and Korea Equity Funds extended their longest inflow streak since the fourth quarter of 2014. Investors appeared more concerned about the impact of a strengthening euro on the export competitiveness of the Eurozone.

Redemptions from Europe Equity Funds hit levels last seen in late February (this fund group posted consecutive weekly outflows for the first time since mid-March), as the euro’s value briefly touched a two and a half year high versus the U.S. dollar. It was also an eight-year high versus the British pound, thanks to stronger economic growth, widespread disenchantment with U.S. economic policy making, and expectations that the European Central Bank will start tapering its current quantitative-easing program sometime in the next six months.

Elsewhere, flows during the seven days ending August 30 indicated a modest jump in risk appetite as High-Yield Bond Funds posted inflows for only the third time since mid-June, Emerging-Markets Bond Funds took in over $1 billion for the sixth time in the past seven weeks, and flows to Emerging-Markets Equity Funds continued to rebound. Overall, EPFR-tracked Equity Funds absorbed another $1.6 billion and Bond Funds $8 billion, while over $17 billion flowed out of Money Market Funds.

At the single-country fund level, Hong Kong Bond Funds recorded inflows for the 26th week in a row while Japan Bond Funds experienced net redemptions for the 19th time in the past 22 weeks. Flows to Pakistan and China Equity Funds hit 11- and 73-week highs, respectively. Korea Equity Funds absorbed fresh money for the sixth straight week.

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

TAGS: Mutual Funds
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