Investors move billions to EMs

Investors move billions to emerging markets in one week [¹]

By Phil Craig | 10 October 2007

Emerging markets equity funds have taken in over $5bn for the second week running, meaning that over the past six weeks the funds have taken in a net $18.9bn while posting a collective portfolio gain of 19.7%.

According to fund research specialist EPFR Global, Asia ex-Japan equity funds took in the most new money with $2.87bn of net inflows over the first week of October alone, while global emerging markets vehicles took in $1.87bn.

Some of the assets came from developed markets funds, with Europe equity funds losing $1.2bn in net outflows, and Japan equity and global bond funds posting net outflows for the ninth straight week.

According to Christian Deseglise, global head of emerging markets business at HSBC Investments, the MSCI Emerging Markets index stood at a record high of 1218.05 on 1 October, more than 50 points above its previous high on 23 July.

"With rising GDP per capita, rapid urbanization and an expanding labor force, domestic consumption is becoming an increasingly important engine of growth for emerging countries. Growth is therefore becoming more sustainable. Overall macroeconomic conditions within emerging markets are also very supportive," he wrote in a report on the markets last week.

Cameron Brandt, EPFR Global analyst, said: "Despite the hints of higher risk aversion, this year’s story is clearly the accelerating shift by investors out of funds geared to the major developed markets and into those focusing on emerging markets. When you look at the numbers through the first three quarters of this year and 2006 the retreat from Japan and Europe equity funds is particularly striking."

Normxxx    
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