In early August, investors committed fresh money to EPFR-tracked emerging-markets equity funds for the 21st week in a row, extending their longest inflow streak since a 24-week run that ended in the first quarter of 2013. A more benign consensus about the pace of U.S. interest hikes carried more weight—for the moment—than the war of words between U.S. President Donald Trump and North Korean leader Kim Jong-un. Retail investors were net contributors for the fourth straight week.
During a week when the geopolitical focus was squarely on the Korean peninsula, Korea equity funds recorded—barely—their third consecutive weekly inflow thanks to commitments from domestic institutional investors. That is the longest streak this fund group has compiled since mid-fourth quarter 2016 and includes last week's record-setting inflow.
China equity funds also failed to attract retail support. But positive flows from both foreign and domestic institutional investors propelled this fund group to its biggest weekly inflow in over a year. Although China's better-than-expected growth this year continues to generate strong opinions, ranging from praise for the government's macroeconomic management to criticism of the role debt continues to play in driving the economy, investors believe that in the short run the improving global picture should provide a tailwind for the Chinese economy.
Whether those tailwinds will lift Brazil's economy out of the doldrums remains an open question. Despite President Michel Temer's success in avoiding prosecution for corruption and in pushing forward with key structural reforms, Brazil Equity Funds posted their fifth consecutive weekly outflow. Managers of Latin America equity funds have, meanwhile, been betting on a cyclical rebound in domestic consumption, with allocations for consumer discretionary, industrials and consumer staples plays all climbing in recent months.
Uncertainty about the outlook for oil prices and discomfort with political trends in major emerging-European and African markets kept the pressure on EMEA equity funds, which posted net outflows for the 20th week running. At the country level, redemptions from Poland equity funds hit a 13-week high, and investors pulled money out of Russia equity funds for the 17th time in the past 20 weeks.
Cameron Brandt is director of research for EPFR Global, an Informa Financial Intelligence company.