A tick up in sentiment? Maybe, for now. The latest numbers from EPFR, the Boston-based fund flow watcher, show investors making a cautious return to EM assets in the week to Wednesday via conservative, hard currency bond funds.
But they withdrew money from EM equity funds. And a resurgence of eurozone worries and concerns about the US economy is likely to keep them cautious in the immediate future.
EM fixed income funds saw inflows equal to 0.46 per cent of assets under management, or $675m in the sample universe surveyed by EPFR, bringing the total over the past four weeks to $1.61bn. Of that, $579m went to hard currency bond funds ($1.48bn over the past four weeks) and $137m to local currency funds (just $157m over the past four weeks).
EM equity funds had outflows of $716m, bringing the four week outflow to $1.66bn. Developed market equities had inflows of $859m but that didn’t make much of a dent in recent outflows, which were $13.34bn over the past four weeks.
Here is Demetrios Efstathiou of RBS:
We attribute the preference to EM Hard Currency bond funds to an investor desire to be long EM combined with a cautious risk appetite. In an uncertain macro environment, investors reign in their greed and look for exposure with defensive capabilities.
The mood has been changing pretty quickly in recent months. Let’s see how that balance of caution and greed plays out over the next few weeks.
Pimco: EM bonds and equities will add power to your portfolio, beyondbrics
Sharp rise in EM debt funds forecast, FTfm
EPFR file, beyondbrics
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