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Emerging market funds face heat

This article was posted on Mar 8, 2009 and is filed under Press Releases

MUMBAI: Asia ex-Japan Equity Funds saw the biggest outflows in dollar terms–a 20-week high of $1.09 billion during the week ending March 4, as per data by Emerging markets Portfolio Funds Research (EPFR). Globally, investors withdrew $12.9 billion from equity and bond funds and moved it to money market funds as equity markets reeled from more news of cash calls, bankruptcies, dividend cuts and longer jobless lines. Of the EPFR Global-tracked equity funds, investors drained $10.4 billion and pulled $2.47 billion out of the bond funds.

All of the major emerging markets equity fund groups tracked by EPFR Global recorded outflows as Latin America Equity Funds saw their eight week, $795 million inflow streak come to an end. This week, the funds geared to China accounted for a third of the money pulled out of Asia ex-Japan Equity Funds as officials talk of 8% growth in emerging Asia’s biggest economy was not supported by any additional policy measures.

Funds investing in two of the other BRIC markets, India and Russia, posted outflows while Brazil Equity Funds eked out a sixth straight week of inflows. Korea Equity Funds also suffered as attention shifted to falling export earnings and the amount of foreign held debt coming due this year.

But Vietnam Equity Funds absorbed fresh money for the fourth time in five weeks as inflows hit a 33-week high.
For the third week in a row all of the major equity fund groups focused primarily on developed markets recorded outflows, with Japan Equity Funds again the biggest loser in percentage terms and US Equity Funds in dollar terms.

Year-to-date outflows from US Equity Funds now stand at $32.4 billion, while investors have removed $2.99 billion from Global Equity Funds.
Japan Equity Funds have had outflows of $1.72 billion and and Europe Equity Funds have seen net redemptions of $539 million. If there is any consolation, it is that outflows so far this year have been at a considerably slower pace than over the same period in 2008. When viewed in percentage of assets under management terms, however, outflows for all except Europe Equity Funds are running ahead of last year’s pace.

EPFR global sr analyst Cameron Brandt said that outflows from Europe Equity Funds during the first week of March were a modest $283 million ahead of the European Central Bank’s anticipated 50 basis points cut in its key interest rate to a record low of 1.5%. “With regional equity indexes falling to six year lows there has been some bargain hunting, the fears of contagion from indebted Eastern European consumers and banks notwithstanding,” he noted.

GDP growth in the US fell at roughly half the Japanese rate during the fourth quarter, with the current consensus calling for things to bottom out during this quarter. US equity funds with a bias towards growth companies outperformed their value counterparts across all capitalisations while the opposite was true in flow terms.

source: Economictimes

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