EM funds see outflow of $29 billion in 2014

Written by fe Bureau | Mumbai | Updated: Mar 12 2014, 10:49am hrs
Emerging market (EM) funds witnessed another $3.8-billion outflows for the week ended March 5, extending the outflow streak to 19 weeks and taking the aggregate outflows this year to $29.4 billion.

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