Russia losing out to Turkey. The weekly fund flows update from EPFR Global reported a big increase in new money invested into Emerging Markets. Amongst the country specific funds, Turkey continues to attract large new flows while Mexico continues to report large redemptions. Russia and Brazil are sidelined.

Playing the theme with caution. Investors still like the emerging market theme but are reluctant to make specific country bets. Most new money is being invested into GEM Balanced funds and, for the week ended last Wednesday, a total of $3,516 mln was placed into this category. That brought the total invested in the GEM Balanced funds since the start of 2010 to $21.8 bln. That is more than two-thirds the total invested into all emerging market funds ($30 bln) this year. Last week’s total is a big increase over the previous week’s $1,675 mln and almost equal to the total of new money invested in July ($5 bln). BRIC themed funds remain out of favour and last week only attracted $42 mln of new money. In July the total was $144 mln. China still taking most. Amongst the country specific funds, China funds are still taking the biggest slice, albeit, last week, that was a relatively modest $115 mln ($945 mln in July). India funds reported net redemptions of $82 mln, the first week of losses after a run of eight weeks with inflows. Brazil funds attracted a net $35 mln last week after $307 mln in July. Brazil funds were very much the favourite in 2009 but, in 2010, they have mostly reported redemptions. Year to date, the aggregate outflow is over $1 bln. Mexico has been the main loser in the region in recent weeks. Last week’s net redemptions totalled $206 mln and follows an outflow of over $100 mln for the previous week. Mexico’s dependency on exports to the US leaves it one of the most vulnerable economies to a US slowdown. Switching preference to Turkey. In Emerging Europe, the fund flow preference is the opposite to that of the global picture. In the latter category investors are playing it safe with the GEM Balanced funds. In Europe, investors continue to avoid the regional funds because of the legacy of solvency risk in Eastern Europe. Last week, these regional funds reported net redemptions of $55 mln, and that follows a loss pf $183 mln in July. Instead, investors had piled into Russia funds but, since the start of the 2nd half, have switched their preference to Turkey. For the week ended Wednesday, Turkey funds reported net inflows of $97 mln while Russia funds only took in $14 mln. Through July, Turkey funds reported positive flows all month and totalled $133 mln. Russia funds were negative for two of the four weeks and, in aggregate, only took in $69 mln.