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Emerging market funds see outflows of nearly $30 billion in 2014

Mar 11 2014, 19:38 IST
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Foreign institutional investors have been on a buying spree in Indian markets. Reuters Foreign institutional investors have been on a buying spree in Indian markets. Reuters
SummaryEmerging market (EM) funds witnessed another $3.8 billion of outflows for the week ended March 5.

Emerging market (EM) funds witnessed another $3.8 billion of outflows for the week ended March 5, extending the outflow streak to 19 weeks and taking the aggregate outflows for this year to $29.4 billion.

As per the Bank of America Merrill Lynch Global Fund Manager Survey, in a complete reversal from 5 years ago, emerging markets are now the biggest risk to financial market stability, while developed market (DM) counterparty and default risk is seen as minimal. However, foreign institutional investors have been on a buying spree in Indian markets. On Tuesday, they bought another $245 million worth of equities, as per the BSE provisional data.

Experts feel the sell-off in emerging markets could continue. “The negative sentiment is pretty much in place so you can expect a lot more selling,” said Frank Mobius, executive chairman, Franklin Templeton, had said earlier in a media interaction. “Emerging markets have borne the brunt of the recent risk-off environment,” BNP Paribas said in a recent report.

Apart from this, the concerns over QE tapering and the recent tensions between Russia and Ukraine have put pressure on the emerging markets. US Fed cut its monthly bond-buying stimulus package to $65 billion on January 29.

“Global emerging market (GEM) equity allocations are now the lowest on record. A net 29% of investors are ‘underweight’ on emerging market equities, which is 2.7 standard deviation below its 10-year average," the BofA ML Global Fund Manager Survey added.

On Tuesday, the MSCI Emerging Markets Index was hovering around a one-week low. The index was trading at 954.98 at 12.18 pm, London time.

Meanwhile, globally, investors pumped in another $7.5 billion into equity funds, as per data from EPFR Global. These inflows marked the 4th straight week of new cash into the equity funds.

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