Emerging mkt funds post outflows last week

Outflows for the first time in 24 weeks

 

Emerging market funds recorded outflows last week, the first time in six months, according to Morgan Stanley.

These funds, one of the highest contributors to foreign institutional flows into India last year, saw redemptions worth of $1 billion, bringing the second-longest period of fund inflows ever to an end (the longest such period was the 29 weeks ended December 15, 2010). In the ensuing three months, or early 2011, emerging markets fell 2.1 per cent. About a year later, stocks had fallen 18 per cent.

However, now, Morgan Stanley doesn't expect emerging markets to follow the trend seen after December 2010. "There are some big fundamental differences between then and now," Morgan Stanley said in a note. "Then, EM (emerging market) central banks had raised interest rates to combat inflation, and the result was a significant slowing in growth in 2011. Now, we think policy is on hold and growth can accelerate somewhat this year."

Emerging market-dedicated exchange traded funds (ETF) recorded outflows of $1.44 billion, while other funds recorded inflows of $0.43 billion. So far this year, about $1.7 billion of emerging market funds flowed into India, said Morgan Stanley, which sourced data from EPFR.

So far this year, foreign institutional investors (FIIs) pumped in $8.4 billion, or about Rs 45,000 crore, into Indian equities, according to Securities and Exchange Board of India data. This includes inflows from pension and hedge funds. Last year, FIIs had put in $25 billion into stocks here, driving benchmark indices up 25 per cent.

Last year, the inflows were led by emerging market- and Asia-centric funds, which invest in India as part of the overall regional investments.

US-based emerging market funds and ETFs saw inflows of $37 billion in 2012 (up to October), according to Morningstar data.