By Ivan Anderzhanov in Moscow
Global emerging market funds were hit by net outflows of $946m this week as investors banked profits following concerns over liquidity in China.
Emerging markets registered net outflows of $1.63bn for the week to 19 August, according to fund trackers Emerging Portfolio Fund Research. This was the first outflow in eight weeks and compared against last week’s inflow of $571m.
Global emerging market funds led the laggards with an outflow of $950m against inflows of $293m a week earlier. Asian funds came next, with outflows of $811m, against the previous week’s outflows of $27m. China funds suffered the most among the Asian funds, accounting for $640m of the total $811m of net outflows from Asia funds, while India funds still attracts capital.
EPFR said China’s growth had been the catalyst for flows into emerging market funds in recent months. It said: “During the third week of August, however, doubts about the quality of the loans doled out at breakneck speed by Chinese banks during the first half of 2009 prompted investors to book profits and take some of their recent gains off the table.”
LatAm and EMEA funds performed well, in spite of the correction. LatAm funds pulled in $74m, lower than the previous week’s $225 mln, while EMEA funds ended the week with inflows of $54m, slightly under the previous week’s $80m.
Andrei Bogdanovich, an analyst at UralSib, said in a note that the outflows outside of China were ‘technical’.
He said in at note: “The S&P 500 made gains on each of the last two days of the reporting week to19 August, bouncing from its recent fall on the back of better-than-expected leading US indicators and an oil-price surge due to a surprising drop in oil reserves. The RTS index saw almost the same movement.
“However, the fact that its fall has been technical and a medium-term upward trend is in play meant that overall fund flows were, as we had expected, meaningless, with the exception of China.”
