Optimistic, but sticking to relative safety of GEM Balanced. Direct market investors have become more optimistic that the US Federal Reserve, the European Central Bank and China are close to adding additional stimulus to their respective economies and this positive mood has now extended to retail fund investors in emerging markets. The weekly fund flow report from EPFR Global showed a net aggregate inflow for the past week, which follows five straight weeks of net outflows, during which period investors took back almost $7.5 bln of the $22.7 bln invested through 1Q12. But investors are mainly sticking with the relatively safety of the GEM Balanced funds and do not yet have sufficient conviction to start allocating directly to country-specific funds. Over the week, a total of $1.2 bln (0.36% of AUM) was added to GEM Balanced, while Asia regional funds lost $305 mln (0.14% of AUM).

China still suffering steady hemorrhage. Among the major country funds, China retail funds continue to report large outflows, losing $432 mln (1.0% of AUM) last week as investors still worry about decelerating growth and a slow policy response from the government. India and Brazil funds, which have either been mostly ignored or suffered big redemptions in previous weeks, had a better week with respective inflows of $176 mln (0.9% of AUM) and $72 mln (0.5% of AUM). All of the allocations came in via ETFs rather than traditional funds.

Russia's losses reach eight weeks. Russia country funds again reported an outflow last week, totaling $33 mln (0.27% of AUM), which brings the run of net redemptions to eight weeks. Last week's outflow compares with a loss of $48 mln the previous week. In reality, Russia funds have been doing little more than marking time since late April, the weekly redemptions since then remaining relatively modest. Year to date, Russia retail funds are still ahead by $881 mln, which compares with net outflows for the other big EM country-specific funds.

But, first positive week in eight for aggregate allocations. When Russia's share of the net investment into the big GEM Balanced funds is taken into account, the total allocation to Russian equities last week is a positive $38 mln, marking the first net positive week out of the past eight. The trend in aggregate weekly flows shows a steadily improving trend for Russia since early May.