Bloomberg News

Emerging Stock Funds Post First Inflow in 3 Weeks, Citi Says

June 03, 2011

(Updates with analyst comment in fourth paragraph.)

June 3 (Bloomberg) -- Emerging-market equity funds attracted about $820 million in the week ended June 1, snapping two consecutive weeks of outflows, according to Citigroup Inc.

Funds investing in developing-nation stocks globally took in $677 million while those focusing on Asia, excluding Japan, drew $270 million, Citigroup analysts Markus Rosgen, Kelly Kwok and Yue Hin Pong wrote in a report today, citing figures from EPFR Global. Latin America funds had net inflows of $104 million, while those for Europe, the Middle East and Africa “lagged” behind, according to the report.

Stocks in the MSCI Emerging Markets Index are valued at 11.1 times estimated earnings, less than a multiple of 12.7 for MSCI World Index of developed nations. The index for developing equities rose 0.1 percent to 1,160.51 as of 10:57 a.m. in Singapore, set for the biggest weekly rally in six weeks.

“Investors like the stronger global emerging market growth outlook and attractive valuations,” Rosgen said in an e-mail to Bloomberg.

China’s inflation will probably peak at the end of this month, averting a hard landing for the economy, China Daily cited former Chinese central bank adviser Fan Gang as saying in Hong Kong yesterday. South African economic growth accelerated to the fastest pace in a year in the first quarter as the lowest interest rates in three decades spurred manufacturers to restock to meet rising demand, according to a June 1 report by Statistics South Africa.

U.S. Growth Slows

Emerging-market equities have outpaced their developed- nation peers this week, with the MSCI World Index set for a 0.9 percent weekly drop. Reports this week showed U.S. manufacturing and consumer confidence cooled, while data from ADP Employer Services missed economists’ forecasts for jobs growth.

The dollar headed for a weekly drop versus most major peers amid signs of a faltering U.S. recovery and after Moody’s Investors Service said yesterday it may put the government’s Aaa credit rating on review for a downgrade. The Dollar Index, which tracks the currency against those of six major trading partners, reached the lowest level in almost a month today.

The weaker U.S. dollar and a “softening in inflation readings” also helped boost inflows to higher-yield emerging markets, Citigroup’s Kwok said in a separate e-mail.

--Editors: Shiyin Chen, Richard Frost

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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