Year-to-date flows into EPFR Global-tracked Emerging Markets Equity Funds moved close to the $38 billion mark during the third week of June as investors committed fresh money to this fund group for the 14th straight week. Two of the major regional groups posted inflows, with commitments to Asia ex-Japan Equity Funds hitting a 102-week high, while the third, EMEA Equity Funds, recorded their 14th straight outflow.
Although the question of China’s inclusion in MSCI’s EM and ACWI indexes dominated the headlines, money flowed to Asia ex-Japan Country Fund groups tied to markets with reform and/or semiconductor stories. While China Equity Funds posted outflows for the fifth straight week, Taiwan Equity Funds followed up last week’s inflow–the biggest since the second quarter of 2015–by taking in another $186 million. India Equity Funds extended their longest inflow streak in two years and Korea Equity Funds recorded their second biggest weekly inflow year-to-date. Greater China Equity Funds also had a good week, with flows climbing to their highest level in 24 months.
Flows to fund groups dedicated to Emerging Asian frontier markets were, however, subdued despite the biggest inflow to Frontier Markets Equity Funds since early 2015. Pakistan Equity Funds followed up last week’s inflow, the biggest in over five years, by recording a small outflow while Vietnam Equity Funds took in less than $1 million
One frontier market that did shine was Argentina, with Argentina Equity Funds posting their biggest inflow since the third quarter of 2014, though these flows may reverse in the wake of MSCI’s decision not to return Argentina to emerging market status. Investors looking to Latin America also pulled more money out of Brazil Equity Funds as allegations of corruption sap President Michel Temer’s ability to deliver on promised reforms.
EMEA Equity Funds remain hobbled by the impact of low oil prices on key markets such as Russia, Saudi Arabia and Nigeria and by the authoritarian drift of politics in Turkey, Russia and South Africa. South Africa Equity Funds have struggled to attract fresh money in recent weeks against a backdrop of ratings downgrades, the country slipping into technical recession and political infighting.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.