FINANCIAL ANALYSIS
by Chris Weafer
Weekly EM Equity Fund Flows: Russia’s Loss is Turkey’s Gain
Investor confidence in EM equities shows no sign of waning. For a 15th straight week, a substantial amount of new money was added to funds in the asset class. The total last week was $4.4 bln, marking one of the biggest weeks of 2012. The total added to EM funds YTD is now $48.2 bln. However, while confidence in potential profits from EM in 2013 is high, investors have no appetite for Russia-specific risk, taking money out of the country for an 11th straight week. The total withdrawn last week was $60 mln, but when Russia’s allocation from the GEM balanced funds is added, the total available was a positive $134 mln. Russia money was again mainly diverted to Turkey.
Another big week for EM fund flows. The weekly fund flow report from EPFR Global showed that a total of $4,446 mln (0.6% of AUM) was added to all EM funds for the week ended Wednesday. This is down from the $5,329 mln added the week before but is still one of the best five-day periods in 2012. Over the past 15 weeks, investors have added $32.8 bln to the asset class, or 68% of the total $48.2 bln received this year. Of the total, 60% was allocated to the GEM balanced category. Funds in this category have taken in $43.4 bln YTD, as investors still have little confidence to pick country-specific risk other than in Southeast Asia. China funds attracted $614 mln (1.2% of AUM) last week, confirming their standing as the dominant country recipient of new money since September. Last week, South Korea funds also attracted a significant inflow of $685 mln (5.43 % of AUM), all coming in via ETFs, as investors speculated on the outcome of the parliamentary election.
Russia’s loss is Turkey’s gain. Russia retail funds again reported a net outflow totalling $60 mln (0.45% of AUM) last week, marking the 11th straight week of net redemptions from Russia funds, most coming from traditional funds ($44 mln) rather than ETFs. It appears to have been a straight switch into Turkey retail funds as they picked up $52 mln (2.1% of AUM) for the period. However, Russia funds have a 7% weighting within the GEM balanced fund category and that allocation more than compensated for the direct fund redemptions. The net effect for the past week is that $34 mln was available, up from the net $127 mln allocation the previous week and the fourth consecutive week when GEM allocations converted directed retail outflows into a positive indirect flow.
To access the full report, click Download Fund Flows Dec 21
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