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Fund flows favour emerging markets equities, US and high yield bonds

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During early April EPFR Global-tracked emerging markets equity and high yield bond funds retained the momentum they carried into the second quarter of 2009 and higher copper, wheat and

During early April EPFR Global-tracked emerging markets equity and high yield bond funds retained the momentum they carried into the second quarter of 2009 and higher copper, wheat and soy prices attracted fresh money into commodity sector and Latin America equity funds.

While the search for higher returns remained the dominant theme for fund flows during the week ending 8 April, the relatively harmonious ending to the recent G20 summit was reflected in a better than usual week for the major fund groups geared to developed markets, all of which managed to post inflows including Japan equity funds.

All equity funds tracked during the week received net inflows of USD3.5bn while all bond funds received net contributions of USD1.3bn.

The week ending 8 April also saw money market funds snap their four week outflow streak. But investors removed money from these funds in each of the last three business days, withdrawing USD7.2bn during between 3 April and 8 April.

Meanwhile, flows into US bond funds hit a 29-week high.

All emerging market equity funds took in USD2.2bn of inflows during the week, or 0.9 per cent of their total assets, and bringing year to date inflows to USD5.4bn.

Asia ex-Japan equity funds enjoyed another solid week, underpinned by faith in China’s growth story. It was the best week of inflows for Asia ex-Japan equity funds since April 2008.  More than half of the USD794m of weekly inflows were received by China equity funds.

Optimism about renewed global growth during 2H09 helped Latin America equity funds post their biggest weekly inflow in USD terms since late 2Q08. It was the biggest weekly inflow as a percentage of total assets in the fund group since mid-2006. The diversified GEM equity funds extended their winning run to three weeks and USD3.7bn, but EMEA equity funds again recorded outflows despite posting the best performance numbers of any major emerging markets fund group.

At the country and sub-regional level both Brazil and China Equity Funds recorded inflows in excess of USD400 million and India Equity Funds snapped an 11-week outflow streak. But Emerging Europe Regional Equity Funds recorded a 13th straight week of outflows as fears about the health of the regionx2019;s banking systems and public finances continue to take their toll.

Flows into EPFR Global-tracked sector funds during the first week of April continued to reflect a degree of faith that growth will begin to pick up during the second half of the year. Technology sector funds absorbed fresh money for a fifth straight week, their best run since early 3Q08, while commodity sector funds posted inflows for the 13th time in the 14 weeks year-to-date, despite turning in the worst performance numbers of the nine major sector fund groups.

The best performers, real estate sector funds, posted a collective 6.2 per cent gain as they took in a net USD329mn. Healthcare/biotechnology sector funds were the only one of the nine fund group to post outflows this week as uncertainty about the shape of possible reforms to the US healthcare sector continued to sap investor confidence.

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