Central banks bolster emerging market fund flows

Emerging markets sign1Flows into emerging market equities and bonds were supported by expectations that the US Federal Reserve would hold interest rates last week, data shows.

In the run up to the Fed’s rate announcement on Wednesday (16th), emerging market equity funds saw their third consecutive weekly inflow, EPFR Global, which gathers fund data, said though did not give specific figures.

Flows were also buoyed by easing measures from the Japanese and Eurozone's central bank, the firm said.

Globally, equity funds took in $4.3 billion (€3.8 billion) during week ending March 16, and bond funds saw $7.6 billion flow into them, while money market funds saw over $35 billion – a 2016 high – leave for riskier assets.

Latin American equity funds, despite problems facing Brazil's economy and the impact of generally weak commodity prices, saw their sixth consecutive inflow, while Brazil equity funds hit a year-to-date high.

EPFR said investors were responding to the political trends and industry consolidation evident throughout the region.

Latin American equity managers are rotating exposure from financial, materials and energy plays to consumer staples and telecommunications firms, the firm noted.

China and India equity funds attracted “modest” inflows. It was the fourth time in the past 20 weeks that Indian equities attract fund flows. EPFR said investors were digesting the Indian budget and statements from the meeting of the Chinese National People's Congress.

In developed markets, investors favoured funds with US and diversified mandates over Japan and European equity funds.

European equity funds saw their sixth consecutive week of outflows, meaning these funds have lost $11 billion in the year to the second week of March.

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