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Fund flows favour emerging market equity and bonds

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Better US consumer confidence data and rising commodity prices helped EPFR Global-tracked emerging markets equity funds extend their inflow streak during late May to 12 weeks and USD23.

Better US consumer confidence data and rising commodity prices helped EPFR Global-tracked emerging markets equity funds extend their inflow streak during late May to 12 weeks and USD23.2bn.

Fresh money also found its way into high yield bond funds and emerging markets bond funds, balanced funds and commodity and energy sector funds.

US bond funds extended their winning run, although daily data showed flows losing momentum as the flood of new debt being issued began to drive yields up, and a majority of the other fund groups geared to developed markets posted inflows as investors digested macroeconomic data showing recent declines in employment, confidence and exports beginning to level off.

Collectively, equity funds posted inflows of USD3.9bn for the week ending 27 May, with emerging markets equity funds accounting for USD2.08bn of that total. Flows into fixed income funds totaled USD2.9bn.

Year-to-date emerging markets equity funds have absorbed a net USD22.3bn while their developed markets counterparts have lost USD53.8bn to investor outflows.

Investors committed USD1bn to global emerging markets equity funds, USD647m to Asia ex-Japan equity funds, USD242m to Latin America equity funds and USD123m to EMEA equity funds during the fourth week of May.

China’s story exerted less of an influence on flows, with China equity funds absorbing a nine-week low of USD18m, as investors spread their cash widely and, for the most part, thinly.

Taiwan equity funds did attract another USD110m, taking inflows over the past 12 weeks over the USD1bn mark, and Russia equity funds posted their 11th consecutive week of inflows as oil prices moved north of USD60 a barrel.

While a boon to emerging equity markets, the jump in the US Conference Board’s consumer confidence index had a modest impact on US equity funds. They absorbed a net USD1.34bn during the week ending 27 May, with small and mid cap ETFs accounting for the bulk of the new commitments.

For the second week running funds with a growth-oriented investment style outperformed those focused on value investing.

The two major diversified fund groups geared primarily to developed markets both took in new money for a fourth straight week. Global equity funds absorbed a net USD58m and Pacific equity funds USD78m.

US bond funds absorbed over USD1bin for the 13th time in the past 16 weeks, year-to-date flows into high yield bond funds pushed over the USD9bn mark and both global and emerging markets bond funds extended their current winning streaks to seven straight weeks – their best runs since 3Q07.

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