Emerging market funds continue inflow run

Emerging market equity fund inflows were seen in the first week of June – while the UK equity mutual funds category posted outflows for the seventh week in a row on Brexit uncertainty.

EPFR Global, which analyses fund flows, said further increases in oil prices, “ebbing” fears of a second US interest rate hike later this month and some “cautious optimism” about China prompted mutual fund investors to boost their diversified exposure to emerging markets.

Global emerging markets equity funds attracted over $700 million (€622 billion) in the week ending June 8, though all three of the major regional groups recorded “modest” outflows.

China remains at the centre of a debate about the accuracy of its economic data, the trajectory of its economy and the direction of promised economic reforms, said EPFR, though recent data suggested some success in rebalancing the economy from manufacturing and exports to services and domestic demand.

But the government's willingness to tackle overcapacity, the shadow banking system and needed reforms is less clear than the willingness of policy makers to take measures in support of demand and infrastructure investment, the fund data firm said. Flows in to China equity funds tailed off as the week progressed and markets digested the latest trade figures.

EPFR also noted that Korea equity funds have posted outflows for 14 weeks, mainly due to institutional investors; data for frontier markets equity funds suggests that managers are “already looking beyond Vietnam to Pakistan”; Russia equity funds continued to attract fresh money as some investors bet that oil prices could climb past the $70-a-barrel mark by year's end; and discomfort with the Turkish government's economic policymaking was reflected in continued Turkey equity outflows.

UK equity funds saw their seventh straight weekly outflow, but daily data showed the redemption rate ebbing, and by the week's end investors had pulled more money out of Germany and Switzerland than UK equity funds, while UK bond funds recorded their fifth straight inflow.

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