Emerging market inflows touch a 10-week high

Inflows into global emerging market funds rose to a 10-week high of $1.58 billion during the week ended June 2.

However, India was far from popular, with outflows tripling on a weekly basis.

Risk aversion and subterranean valuations in China attracted capital to the dragon nation. “China has seen huge correction of around 35-40% from their highs. The flows there may be on account of relatively cheaper valuations there,” said Naresh Kothari, president at Edelweiss Capital.

The Shanghai Composite on June 7, 2010 closed at 2511.73, its lowest in the last one year. The index has corrected significantly from its 52-week high of 3471.44 touched on August 4, 2009. On Tuesday, the index closed flat, up 2.22 points from Monday’s close.

The Sensex closed at 16617.10 on Tuesday. It is currently 7.52% off its 52 week high of 17970.02 reached in April this year.
Market experts say China Equity Funds had their best showing since the third week of April despite rising wages that could cut into exporter’s margins and keep the pressure on domestic inflation.

A Citigroup report authored by Elaine Chu and Markus Rosgen too noted that, at $306m, China fund inflows were up threefold last week, taking total net inflows since April to $1.6 billion.

India is unlikely to remain pariah for long, suggested experts, though institutions may prefer to bide time on account of risk aversion.

Meanwhile, global equity funds absorbed about $1.5 billion in the week ended June 2, helped by inflows to European stocks as investors speculated that Germany’s exports will benefit from the euro’s declines, EPFR Global said.

European equity funds received some $1.46 billion, helping overall equity funds halt redemptions of more than $20 billion in the previous week, EPFR said in an e-mailed statement. Funds investing in US also took in money, while commodity funds, the best performers this year, reported their first outflows since March.

“Better macroeconomic numbers from the US and Europe prompted some investors to move back into asset classes that could prove to have been oversold during the latest crisis of confidence,” said EPFR.  (With Bloomberg)