Inflows into Asia-focused equity funds quadrupled to $754 million (Rs 3,437crore) in the week ended last Wednesday. This was the biggest weekly inflow in three months, and experts suggest that the uptrend would continue at least in the short term.
Investors have turned away from developed nations and put money in emerging markets, and Asian funds in particular, in the hope of further upside once the results season rolls in, said Citigroup analysts Elaine Chu and Markus Rosgen in a global markets report.
“With the results season around the corner, and the consensus now forecasting a 19% EPS growth for 2009E, we think foreigners are likely to put more money into Asian funds as they hope for an earnings-driven rally,” said the analysts.
India has been benefiting from flows in recent days. Over the last ten sessions, foreign institutional investors have been net buyers in Indian markets by Rs 11,497.50 crore.
“A lot of long-only funds have moved back into India after the budget. The sentiment is positive and the next major trigger is likely to be the monsoons,” said Amit Khurana, head of institutional equity at Mangal Keshav Securities.
On the other hand, developed nations have been hit by fears of a sovereign default. Inflows to funds with a developed-market bias were at $1.3 billion (Rs 6000 crore) for the week ending last Wednesday, down 41% over the previous week. “There is increasing concern over the situation in Europe. The deficit situation is difficult to contain and things are not yet back to normal,” said Sanjeev Patni, president and head of institutional equities at Prabhudas Lilladher.
Also, rating agency Moody’s Investors Service has warned that a lot of triple-A-rated countries have moved closer to losing that status. The US, UK and Germany are some of the countries that are accorded the highest credit rating.
Should the situation in more developed countries worsen, the current move towards India and other emerging markets could reverse, said Jay Shankar, chief economist from Religare Capital Markets.
“An inflection point could be reached in the event of another financial catastrophe, and international investors could very well turn risk averse,” he said.
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