Investors Pull Out of Emerging Market Funds

a_20110210_B_jhlee76_237.pdf

http://www.google.co.kr/news/search?aq=f&cf=all&ned=us&hl=en&q=epfr

http://online.wsj.com/article/BT-CO-20110211-711044.html

http://www.reuters.com/article/2011/02/11/investing-fundflows-epfr-idUSN1127858120110211

---

• FEBRUARY 11, 2011, 1:27 P.M. ET

UPDATE: Investors Pull Out of Emerging Market Funds As Nations Battle Inflation

(Updates with EPFR comment and more data.)

 
   By Cynthia Lin 
   Of DOW JONES NEWSWIRES 
 

NEW YORK (Dow Jones)--Major capital flows away from emerging-market assets carried on this week, as measures taken to fight inflation put a check on developing nations' rapidly-growing economies.

Coming out of the Lunar New Year, Chinese authorities announced an unexpectedly early rate hike, highlighting the trend toward tighter policies across the emerging world. Prior to that, Indonesia became the latest among EMs to raise rates, with analysts expecting more nations to follow through the course of the year.

"The softer demand for now [partly comes from] the fact that there are inflation pressures within emerging markets, and people are worried how economies will turn out," said Sandeep Tharian, credit strategist at Standard Chartered.

According to global fund tracker EPFR, investors withdrew another $3 billion out emerging-market equity funds for the week ended Feb. 9. That adds to the $7.02 billion pulled out in the prior week, which marked a three-year record in weekly redemptions. Developed-market funds attracted inflows for the sixth week in a row.

On a country level, the fear of softer Chinese demand weighed on Latin America Equity funds, which endured its largest weekly outflow since the second quarter last year.

Emerging-market bond funds also saw another week of outflows, with an 11-week high of $477 million taken out. While most of the redemptions came out of hard-currency funds, local-currency funds followed suit for the first time since the last week of May, with $67 million of outflows.

"It's been a general kicking of the tires and testing of assumptions since late in the fourth quarter [of last year]," said Cameron Brandt, global markets analyst at EPFR. "There seems to be less acceptance of momentum and investors are asking where's the value."

The last two years saw large amounts of capital go into anything emerging markets oriented, with market particpants blindly throwing money into the EM wave, many say. Yield-hungry investors first tapped the BRICs -- Brazil, Russia, India, and China -- then gravitated toward lesser-known frontier markets in search of returns.

So far this year, investors seem to be taking pause. In fact, the sub-groups of funds getting money are the ones that did not fare as well in 2010, Brandt said, pointing to Russia and Taiwan as the value plays investors seem to like so far.

And as emerging-market funds fluctuate, high-yield bond funds once again stole the show this week, with more than $1 billion of inflows for the fifth time in six weeks, EPFR noted. The appetite for such bonds continue to rise, especially as recovery among the developed nations gain traction. It is the only asset class that has enjoyed consistent inflows since the start of the year, Tharian noted.

Moreover, the volatile situation in Egypt did not help the growing hesitance toward emerging-market assets. While Brandt sees little movement driven directly by the region's upheaval, "it probably gave investors an extra nudge" to stray away from EM assets. Funds focused on Africa posted outflows for the week, but the broader EMEA universe remains well-received, he added.

"It's the same story this week with flows always from emerging-markets...but it does not mean an exodus," Tharian said, adding that once macroeconomic and inflation sentiments settle down, we might see flows back into emerging market assets in the second and third quarter this year.

-By Cynthia Lin, Dow Jones Newswires; 212-416-4403; cynthia.lin@dowjones.com

---

Developed markets best emerging in fund flows-EPFR

Fri Feb 11, 2011 12:51pm EST

* EPFR Global data shows high yield bond inflow record

* Globally-tracked equity fund inflows of $2.8 billion

* US, Europe, Global, Japan equity inflows total $6 bln

* Emerging market equity net outflows of $3 billion

By Daniel Bases

NEW YORK, Feb 11 (Reuters) - Investors hunting for higher returns on their cash put a record net $1.4 billion extra into high yield bond funds for the week ended Feb. 9, while the rotation into developed market stocks continued, data from EPFR Global showed on Friday.

All equity funds tracked by the Cambridge, Massachusetts-based firm showed net inflows of $2.8 billion while all bond funds combined had net outflows of $186 million.

Money market funds, typically used as a place to park cash for safe-keeping, took in a seven-week high $14.2 billion.

In the equity space, funds focused on the United States, Europe, Global and Japan took in a net $6 billion or so.

However there was a net $3 billion pulled out of emerging market equities as well as $351 million from Pacific equity funds.

EPFR said in a statement that the protests in the Middle East, which resulted on Friday with Egyptian President Hosni Mubarak's stepping down after 30 years in power, and China's latest interest rate risk were the dominant factors behind another week of net redemptions in the sector.

Emerging market local currency debt funds had net outflows of $67 million while the hard-currency variety had outflows of $422 million in the latest week.

In sector funds, both energy and commodity funds took in net new cash of $1.01 billion and $1.14 billion, respectively.

DEVELOPED

Drilling down into the data, EPFR said U.S. equity funds had modest inflows of $503 million, a ninth week out of the last ten, with mid-cap growth faring better than those with a value orientation.

---

a_20110210_B_jhlee76_237.pdf

0.56MB