EPFR Global-tracked Emerging Markets Equity Funds continued to attract fresh money going into the second half of April, despite the geopolitical storm clouds over the Middle East and the Korean peninsula. Collectively, they posted inflows for the 13th time in the past 16 weeks. Asia ex-Japan Equity Funds extended their longest inflow streak since the third quarter of 2014 and the diversified Global Emerging Markets (GEM) Equity Funds took in new money for the 15th straight week.
Underpinning flows into Asia ex-Japan Equity Funds was a marked improvement in sentiment toward China, whose efforts to defuse the latest confrontation between North Korea and the U.S. appears to have weakened U.S. President Donald Trump’s antipathy towards its trade policies and currency regime. Dedicated China Equity Funds saw their 11-week redemption streak come to an end, as inflows jumped to their highest level since the final week of May 2016.
India Equity Funds also attracted fresh money from investors attracted to the country’s defensive qualities, its more than 6 percent GDP growth and its ongoing reform story. Interest in the latter currently centers around the national goods and sales tax scheduled to replace the patchwork of state levies in the third quarter of this year. Freeing businesses from the compliance costs and inefficiencies of the existing system will, by some estimate, boost India’s GDP by some 2 percent.
Hopes that a broad shift against left-of-center populism in Latin America heralds structural economic reform, in markets ranging from Chile to Brazil, helped Latin America Equity Funds post inflows for the third time in the past four weeks. In addition to Brazil’s efforts to revitalize its economy, with the country’s labor codes currently being reviewed, the socialist governments of both Venezuela and Chile have come under pressure from disgruntled citizens in recent weeks.
Among the EMEA Country Fund groups, both Turkey and Russia Equity Funds posted outflows. The seventh straight outflow for Turkey Equity Funds occurred during a week when a constitutional referendum expanding the power of the presidency was narrowly approved by Turkish voters. Russia Equity Funds, meanwhile, face headwinds ranging from deteriorating relations with the U.S., the inability of oil prices to break decisively above the $50 a barrel mark and the costs of Russia’s involvement in Syria, Chechnya and the Ukraine.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.