Emerging Bond, Equity Inflows Rise on Stress Tests
July 29, 2010, 9:45 PM EDTBy Bloomberg News
(Updates with EPFR comment in third paragraph)
July 30 (Bloomberg) -- Emerging-market equity and bond fund inflows rose in the week ended July 28 as European bank stress tests and U.S. earnings reports bolstered investor optimism, EPFR Global said in a statement.
Asia ex-Japan emerging-market equity funds received more than $1 billion, the strongest inflows in 14 weeks, EPFR said. Global emerging-market equities, emerging-market bonds and high- yield bonds also each received more than $1 billion, it said.
The flow into developing-nation funds “accelerated in late July as some of the clouds hanging over the asset class, most notably the prospect of weaker U.S. and European demand, lifted for several days,” said Cambridge, Massachusetts-based EPFR, which tracks $13 trillion of assets, in an e-mail.
The MSCI Emerging Markets Index tracking developing-nation equities has gained for the past eight trading sessions, as concern ebbed that Europe’s government-debt crisis will slow growth and companies from DuPont Co. and FedEx Corp. raised their profit forecasts amid improving demand. The measure dropped 0.2 percent to 992.21 as of 9:34 a.m. in Shanghai.
Indian equity funds posted an eighth consecutive week of inflows and China stock funds recorded the biggest weekly intake since mid-April, EPFR said. Commodity funds had the biggest outflow on record, according to the statement.
Stress Tests
Governments from Spain to Ireland have stepped up efforts to push down budget shortfalls. Greece, which triggered the crisis after saying its deficit was more than four times the European Union’s limit, has pledged to trim the shortfall to 8.1 percent of gross domestic product this year, from 13.6 percent last year.
The Committee of European Banking Supervisors said July 23 that only seven of 91 banks in the EU failed stress tests. European Central Bank President Jean-Claude Trichet on July 26 called them “a very important transparency exercise.”
Dollar bonds in developing nations handed investors a 9.7 percent return this year, according to JPMorgan Chase & Co’s EMBI Global Diversified Index. U.S. Treasuries advanced 6.1 percent and European debt rose 3.5 percent, according to Bank of America Merrill Lynch’s indexes.
The yield premium investors demand to own emerging-market debt over U.S. Treasuries narrowed to 2.8 percentage points on June 16, compared with 3 points a week earlier, according to JPMorgan’s EMBI Plus Index. The spread reached 3.55 points on May 25, the widest since September 2009.
--Chua Kong Ho in Shanghai, Lilian Karunungan in Singapore, with assistance from Garfield Reynolds in Sydney: Editors: Linus Chua, Allen Wan
To contact the reporters on this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net; Garfield Reynolds in Sydney at greynolds1@bloomberg.net
To contact the editor responsible for this story: Linus Chua at lchua@bloomberg.net; Nicholas Reynolds at nreynolds2@bloomberg.net
