By Mark Robinson, Head of Equity Research at Unicredit Securities
Russian and GEM funds saw slight net inflows in the week to 17 February 2010 thanks to money coming into ETFs, EPFR data shows. After three weeks of net outflows, Russia-dedicated funds saw an inflow of $13m: the positive $22m cash result of ETFs offset the outflow of USD 9mn from other funds.
The same trend was noted in Global Emerging Market funds, where Russia’s weight as of January 2010 totaled 7.21%. Thanks to inflows in ETFs, the total net result was an inflow of $ 294m.
Year-to-date the trend is still positive: both Russia and GEM funds show net inflows of USD 232mn and USD 806mn respectively.
Our view: The increase in ETFs’ popularity and the three-digit gain of the Russian stock market in 2009 are both possible explanations of the strong inflows in Russian ETFs. We see this trend continuing, as one of the ETF market leaders BlackRock/iShares is to launch its capped Russian ETF later this year.
We also note that the share of ETFs in total GEM and Russian funds’ assets tracked by EPFR is about 30% and rising, and this could lead to increased volatility in fund flows, due to the more speculative nature of exchange-traded funds. We also note that this fact increases the importance of a security’s inclusion in major stock indices, since ETFs are index-based funds.
Conclusion: The news is slightly positive for the Russian stock market.
