Investors still favour emerging markets. Global market uncertainties, such as the Greek debt restructuring, have not yet dissuaded investors from continuing to raise exposure to the emerging market asset class. Having put around $75 bln into EM funds in 2009, most of which was a switch from US equity exposure, investors are still building on that with new allocations. In the week to last Wednesday, the data from EPFR Global shows that a total of $1.9 bln was placed in all EM funds. Of that, $602 mln went into GEM Balanced funds and brought the total for April to $3,898 mln. That was the best month since last October. BRIC themed funds took in a modest $39 mln last week and $85 mln for the month. Emerging Europe funds also remain consistently positive and last week’s $115 mln was the seventh straight week of new money flows. Year to date the total for that category is $431 mln.
Russia funds steadily attracting new money. China funds reported the highest volume of inflow for April but Russia funds have been the most consistent in attracting positive flows this year. Last week, Russia funds reported new money of $347 mln. That was the eleventh straight week of inflows for these funds and brings the total so far in 2010 to $2,167 mln, including $729 mln in April. China funds reported new money flows of $1,239 mln through April and that brings the total for the year to $1,284 mln. China funds attracted very little new money in the 1st Qtr due to fears over lending curbs. Brazil funds continue to suffer redemptions, albeit last week the loss was only $4 mln. That was the third straight week of outflows from Brazil and brings the year to date flow total to a negative $50 mln. India funds took in $88 mln, bringing the total this year to $574 mln.
Russia neutral within GEM funds. The comprehensive end March fund structure report was also published last week by EPFR. It shows that Russia’s weight within an average EM fund is 7.26%. That is up slightly on the 7.20% at end February but down on the 7.66% at end January. That is roughly neutral relative to the weight of Russia within the MSCI EM Index. Investors are wary of increasing Russia risk until they see hard evidence of domestic economic recovery that does not depend on exports to China. The weighting of Brazil in EM funds is sliding and, at end March, was 15.77%. That compares with 16.6% at the start of the year and 17.2% at the end of November last. That drift within the BRIC theme from Brazil to Russia is expected to continue so long as oil stays above mid $70’s p/bbl. Brazil is facing a difficult election period, is raising interest rates and assets are, on average, a lot more expensive than Russian peers when viewed with 2011 forecasts. Russia’s weighting in the Emerging Europe category was 48.92% at the end of March. It has been consistent around that level since last October. Turkey’s weight has increased very slightly to 12.85% of the category.