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Record outflows for China equity funds as questions about growth multiply

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The final weeks of Q1 2014 have been marked by Russia’s redrawing of its maps to encompass the Crimea and China’s latest steps towards the more rational allocation of capital.

The effect of the former on fund flows has, so far, been modest. But investors are much less sanguine about China’s efforts to rebalance its economy without triggering a hard landing for its export, banking and real estate sectors, with EPFR Global-tracked China equity funds suffering their biggest weekly redemption on record in mid-March.
 
While over USD1.5bn flowed out of China equity funds during the week ending 18 March flows into Europe, emerging Europe and Russia equity and bond funds were consistent with the general patterns seen before Ukrainian president Viktor Yanukovych was driven from power: solid inflows for Europe equity and bond funds and outflows for funds with a Russia or regional emerging Europe focus.
 
 
Overall, a net USD9.1bn flowed into EPFR Global-tracked equity funds despite redemptions in excess of USD4bn from emerging markets equity funds. Flows into dividend equity funds hit their highest level since early 2Q13 with the bulk of the new money going to a single mutual fund company. Bond funds absorbed USD3.46bn during the week while outflows from money market funds totalled USD31.8bn.
 
At the country level investors continued pumping money into equity funds dedicated to the so-called PIIGS markets – Portugal, Italy, Ireland, Greece and Spain – and those looking for regional alternatives to China committed modest sums to India and Korea equity funds.

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