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FUND FLOWS: Investors Continue Putting New Money in Emerging Market Equities

Fresh money flowing into Latin American energy and materials sectors, as investors eye growing demand for region’s ore and copper.

The prospect of higher U.S. interest rates and lower oil prices did not stop investors from committing fresh money to EPFR Global-tracked Emerging Markets Equity Funds in early March for the eighth time in the past nine weeks. Diversified Global Emerging Markets (GEM) Equity Funds accounted for the bulk of the headline number during a week when retail investors committed fresh money for the first time since late October.

Among the major regional fund groups, only Latin America Equity Funds recorded inflows as investors looked beyond data confirming that Brazil’s recession continued through the end of last year to the stronger demand for the region’s commodity exports, such as iron ore and copper, that they see coming from the U.S. and China in 2017. Brazil Equity Funds took in fresh money for the seventh consecutive week and flows into Chile Equity Funds climbed to an 18-week high.

Recent sector allocations data shows that managers of Latin America Equity Funds, who have been rotating out of consumer stocks into energy and materials plays since 1Q16, sharply increased their exposure to the latter coming into 2017.

Meanwhile Russia Equity Funds appear to have ridden their country’s commodities and U.S. relations reset story as far as investors are comfortable with, at least for the moment. After a taking in over $2 billion during an unbroken run of inflows starting in mid-November, these funds have posted consecutive weekly outflows for the first time since mid-August.

Among the Asia ex-Japan Country Fund groups China Equity Funds recorded outflows for the fifth straight week as investors digested the latest Chinese data showing a trade deficit and rising foreign exchange reserves and Korea Equity Funds experienced net redemptions for the 13th time in the past 14 weeks. In both cases, local currency-denominated outflows accounted for the bulk of the headline number.

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

TAGS: Mutual Funds
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