Flows by equity fund:
- Inflows to US and Western European funds in the week of 27 after outflows in the previous week.
- YTD US funds are still $ 46.8bn down and W European only $ 1.3bn up.
- GEM funds posted $ 1.1bn inflows in week of 27 May, YTD GEM funds lead with $ 11.7bn inflows.
- Asia and Latin America continue to receive the biggest inflows in the EM universe.
- EMEA funds posted the 4th consecutive week of inflows.
- EM Europe (EME) funds also received inflows in week of 27-May, however, still negative balance YTD.
- Russia funds dominate flows in EME, YTD balance well ahead of Turkey funds.
The core market picture remains volatile. Weekly flows to US and W European funds oscillate wildly and the year-to-date balance does not suggest to us a great deal of confidence of investor confidence in equity funds. The outlook for earnings in the next quarter is mixed at best and we are sceptical that we have seen the bottom in the first quarter.
Emerging market funds are in much better shape compared to their core market peers and also compared to a year ago. At the end of May 2008, GEM funds have inflows of $ 1.7bn, Asia funds outflows of $ 6.2bn and Latam inflows of $ 2.4bn. Painfully (from our point of view) only EMEA funds are in a worse position than a year ago. By the end of May 2008, EMEA funds had managed to attract inflows of $ 2.4bn. This year EMEA funds are still in negative terrain. On a positive note, the flow picture has improved in recent weeks, which gives us some hope for the coming months.
Flows by country:
- Positive flows to EME across the board.
- Russia back to $ 100m-plus flow after last week's relatively low figure.
- South Africa, Turkey and Israel lead the rest of the region with healthy inflows.
- More evidence that CE3 is back on investors' radar screens, in particular Poland.
- Romania continues to lead EME frontier markets.
- Bulgaria and Ukraine more or less stagnated in the week of 27-May.
EM Europe continues to attract more inflows that dedicated funds, which lends support to our view that trading desks and a combination of global, pan-regional and sector funds drive equity markets in our region. EME (and EMEA) funds have seen better flows since late April and we believe (hope) positive flows will continue in the coming weeks. Good stock market performance in most EME markets coupled with receding concerns about external financing (owing to IMF and EU support) and less volatile currencies provide a positive backdrop for attracting more inflows.