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Reality check claims emerging markets inflow streaks

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A run that began in early March ended for EPFR Global-tracked emerging markets funds during the week ending 24 June as investors pulled a net USD1.87bn out of Asia ex-Japan, Latin Ameri

A run that began in early March ended for EPFR Global-tracked emerging markets funds during the week ending 24 June as investors pulled a net USD1.87bn out of Asia ex-Japan, Latin America, EMEA and the diversified global emerging markets equity funds.

Doubts about the timing of a recovery in the global economy also hit high yield bond and global equity funds, which saw inflow streaks of 14 and seven weeks snapped, while money market and US bond funds absorbed USD25.9bn and USD1.72bn respectively.

Global and emerging markets bond, balanced, commodity and energy sector and Pacific equity funds sustained their current winning runs. Overall, EPFR Global-tracked equity funds posted outflows of USD4.12bn for the week while flows into fixed income funds other than money market funds totalled USD1.94bn.

The reversal of flows into emerging markets equity funds going into the final week of June was most pronounced among Asia ex-Japan and Latin America equity funds, which surrendered USD660m and USD457m respectively, as investors questioned where and when demand for their manufactured and commodity exports will pick up.

Investors pulled USD262m out of China equity funds – the biggest weekly outflow since the first week of March – and another USD175m out of Greater China equity funds.

Funds investing in markets dependent on the commodity story also suffered, with Russia and Brazil equity funds posting outflows for the first time in 15 and 12 weeks respectively.

India equity funds also recorded outflows, although dedicated BRICs (Brazil, Russia, India and China) equity funds extended their current winning run.

EPFR Global-tracked US equity funds posted modest outflows for the third time in four weeks heading into the final week of June with large cap growth funds the only general sub-group to take in fresh money. Exchange traded funds investing in US financial stocks also attracted strong flows.

In Europe, confidence in the region’s financial plays was bolstered by the European Central Bank‚s willingness to pump fresh liquidity into the sector. But Europe equity funds posted another week of outflows, their fourth straight, with the bulk of the USD602m redeemed coming from funds with a regional mandate. Macroeconomic numbers for Europe remain grim, with the service and manufacturing sectors still contracting and rising unemployment adding to the pressure on consumer demand.

Although the spread between US Treasuries and JP Morgan’s benchmark EMBI+ index climbed over 460 basis points during the second half of June, EPFR Global-tracked emerging markets bond funds managed to extend their inflow streak to 11 straight weeks as they took in a net USD30m.

Global bond funds also extended their current winning run to 11 straight weeks and balanced dunds posted inflows for the 12th straight week. But high yield bond funds were not able to shrug off the diminished risk appetite, posting outflows for the first time since the second week of March.

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