Emerging market fund flows still positive for 2013

China bicyclesNet inflows into emerging market funds in Europe are still positive for the year to date, despite two disastrous months when investors seemed to lose all appetite for these products.

Investors made nearly €3 billion of net redemptions from emerging market equity funds in June and nearly €1 billion the following month, according to data from Lipper, but because inflows in the first quarter had been strong, the year-to-date figure for flows is still in positive territory at €4.5 billion.

“After strong inflows during the first quarter 2013, emerging market equity funds faced outflows over the second quarter 2013. However, these outflows did not offset the inflows,” says Detlef Glow, Lipper's head of European research.

Emerging market equities have fallen in value following remarks from the US Federal Reserve that suggest an end to quantitative easing. Investors seem to view emerging market equities as a speculative asset class that will suffer particularly severely from the withdrawal of central bank stimulus. Risk aversion has favoured developed market equities.

“It appears that those investors still buying equities prefer developed economies, such as the US, due to an expected better risk return profile for those countries, compared to emerging market countries,” says Glow.

The fall in value in emerging market equities may create buying opportunities, however, with some fund managers claiming emerging market stocks are now undervalued.

Lipper measured a net inflow of €15 billion into emerging market equity products over the course of 2012.

©2013 funds europe