Global Economics

Money Still Pumping into Emerging Market Funds


Led by the BRIC countries, inflows are now running at their highest levels since December 2007

Emerging market funds have raked in a weekly haul of $4.9 billion according to data tracked by EPFR Global. This represents the biggest weekly inflow total since late December 2007.

Net inflows into emerging market equity funds have now crossed the $50 billion mark for the year-to-date.

BRIC nations—especially China, India and Russia equity funds—all recorded strong inflows for the week. Even Brazil's imposition of a tax on foreign inflows to try and halt the recent run-up in the value of the country's currency did not stop the momentum of money coming into Brazil funds, even as that country's stock market was hit.

Inflows into Russian equity funds were the highlight of emerging market flows. The $450 million they took in was their best week in dollar and percentage terms since Massachusetts-based EPFR Global started tracking them in 2002.

"Despite last quarter's inflows Russia still lags the other BRIC countries this year," says Michael Hanson-Lawson, managing director of Russia private equity specialist East Capital in Hong Kong. "Although the Moscow RTS market has risen 130% this year, it must be remembered that the market was priced for Armageddon in January 2009 and valuations were at all-time lows. Compared with its peer group, Russia at ten times forward earnings and a price-to-book of approximately 1.1 times Russia compares favourably."

Capital flows into emerging Europe equity funds went into the black for 2009 for the first time. These eastern European funds recorded a 14th straight week of inflows after being hit hard for the first four months of 2009.

Asia ex-Japan equity funds saw net inflows of $781 million for the week and that was attributable to greater investor interest in Korea, India and Thailand. Japanese funds received a fifth straight week of redemptions thanks to the yen's strength as that currency approached 14-year highs against the US dollar.


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