Informa Intelligence
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FUND FLOWS: Investors Sour on Latin America

Redemptions from Brazil Equity Funds hit a 36-week high despite more optimistic projections for economic growth, the central bank’s easing bias and rising commodity prices.

Institutional support enabled Emerging Markets Equity Funds to post inflows during the week ending April 25 for the 10th straight week and the 62nd time in the past 69 weeks. Diversified fund groups generally fared better than their single country counterparts when it came to pulling in new money, although the two freshest reform stories—South Africa and Saudi Arabia—continued to attract investor interest and cash.

The week did see Latin America Equity Funds post their first outflow since January, thereby snapping their longest inflow streak since the second half of 2010, as political uncertainty and a growing fiscal deficit cooled enthusiasm for Brazil’s recovery story. Redemptions from Brazil Equity Funds hit a 36-week high despite more optimistic projections for economic growth, the central bank’s easing bias and rising commodity prices. Latin America Equity Fund allocations to Brazil and Mexico, which hit their highest level since mid-3Q13 and lowest since 4Q13, respectively, coming in March, rolled over during the final month of the first quarter with the latter seeing a small gain in its average weighting.

Also posting collective outflows were EMEA Equity Funds. Discomfort with the authoritarian drift of politics and policymaking in Eastern Europe, and the consequences of Russia’s aggressive foreign policy, more than offset fresh commitments to South Africa and Saudi Arabia Equity Funds.

Asia ex-Japan Equity Funds attracted fresh money for the sixth straight week. At the country level, Malaysia Equity Funds continue to post inflows as investors anticipate incumbent Prime Minister Najib Razak will emerge from next month’s general election with a mandate to continue the existing economic policies. But India Equity Funds saw more money flow out despite a headline GDP growth rate that exceeds China’s. The impact of higher oil prices on the country’s current account deficit and inflation rate, the Indian banking system’s struggles with demonetization, scandals, bad loans and a government looking ahead to next year’s general election have all taken a toll on investor sentiment.

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

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