Going into the second half of February, flows into EPFR Global-tracked Emerging Markets Equity Funds were positive for the sixth week running as retail redemptions fell to their lowest level since early November. The week also saw Asia ex-Japan Equity Funds snap their eight-week redemption streak and the diversified Global Emerging Markets (GEM Equity) Funds record their biggest inflow in over five months.
At the country level funds dedicated to two of the four BRIC markets, India and Russia, posted strong inflows while Brazil Equity Funds extended their longest inflow streak since early 2Q16 and redemptions from China Equity Funds remained subdued. BRIC Equity Funds also fared well, recording their biggest weekly inflow in more than a year.
India Equity Funds saw inflows hit levels last seen in the first half of 2015 despite widely differing forecasts for the Indian economy in 2017. Current GDP growth forecasts range from 6.5 percent to 7.5 percent, with those predicting the lower end of this range citing a lack of private business investment, rising oil prices and the blow to consumer demand from the government’s pre-Christmas currency reforms that pulled over 80 percent of the country’s existing paper currency out of circulation.
At the other end of the market size scale there has been renewed interest in so-called Frontier Markets, with commitments to Frontier Markets Equity Funds hitting their highest level in over two years as they posted inflows for the fifth straight week. That is the longest such run since early 2Q15. Managers of these funds have been increasing their exposure to Argentina, with its ongoing reform story, and Pakistan where GDP growth is expected to exceed 5 percent this year on the back of increased direct foreign investment, declining inflation and much improved public finances.
Cameron Brandt is Research Director of EPFR Global, an Informa Business Intelligence company.