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Risk back in vogue for investors abroad

Investors have turned to emerging markets to generate that bit of extra profit.

Written by Agencies | Hong Kong |
June 18, 2010 10:21:17 am

Investors have turned to emerging markets to generate that bit of extra profit from rising stocks there.

Investors set aside sovereign debt fears (by countries) and shifted their money to higher-returning assets in mid-June,with emerging market assets and U.S. equities among the recipients of fresh cash,EPFR Global said in a report on Friday.

Of all the funds tracked by the firm,equity funds posted inflows of $15.4 billion and bond funds took in $3.2 billion for the week ended June 16.

A single,large-cap U.S. exchange traded fund accounted for $10.8 billion of the flows into stock funds,or 70 percent of the total,EPFR said.

The portfolio flow activity suggests the worst of the violent market selloff in riskier assets is over,and economic data,particularly out of China and the United States,were reasons enough for investors to buy back some of the assets they sold in the last few months.

During the period covered by EPFR’s latest data,the MSCI world equities index rose 5 percent,the euro strengthened 2.7 percent and the benchmark 10-year U.S. Treasury yield climbed 9 basis points.

EMERGING MARKET EQUITY FUNDS

The fund group absorbed $2.5 billion in the week,the second-highest inflow this year.

The Global Emerging Markets classification saw inflows of $1.8 billion,the highest in 11 weeks.

Asia ex-Japan equity funds and Europe,Middle East & Africa funds had inflows,while Latin America funds extended a string of outflows to 10 weeks.

Russian equity funds had net inflows for the 14th time in the past 17 weeks.

DEVELOPED MARKET EQUITY FUNDS

Four of the five of the developed equity funds tracked by EPFR Global took in fresh money during the second week of June.

U.S. equity funds were a major attraction,with $12 billion in inflows in the week. However a large-cap ETF accounted for the lion’s share of the flows.

Europe equity funds posted small outflows but Germany,Italy,Switzerland and UK equity funds all had inflows.

SECTOR FUNDS

Commodity-focused funds have been the star of sector specific fund groups. However,inflows to commodity funds eased to $159 million in the latest week,with risk aversion waning.

Commodity funds had sucked in $10.1 billion over the past eight weeks.

Financial sector and technology sector funds had the biggest outflows in the week.

BOND FUNDS

U.S. bond funds continued to dominate the broader classification,taking in $2.3 billion in the latest week and extending an inflow streak to 66 weeks.

Emerging market bond funds were the second-biggest recipient of fresh money,with more than half of the inflow headed to local currency mandates.

High yield bond funds attracted a net $164 million after five straight weeks of redemptions totaling $6.27 billion.

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