Emerging-Market Equity Funds Post Fifth Week of Inflows, Citigroup Says

Emerging-market equity funds attracted capital for a fifth straight week, the longest streak since December, according to EPFR Global.

The funds lured $1.83 billion in the week ended April 27, EPFR said in a statement today. Flows into Asia stock funds excluding Japan climbed to almost $3 billion in April, supported by “renewed faith in the resilience of the region’s economic growth,” the researcher said. Latin America posted inflows for the first time in 14 weeks, with commodity exporters benefiting from Asia’s growth, and funds invested in Europe, the Middle East and Africa took in money for the sixth week in a row.

The MSCI Emerging Markets Index is up 2.9 percent this month, adding to March’s 5.7 percent climb, on speculation economic growth will sustain earnings. China’s economy grew a faster-than-estimated 9.7 percent in the first quarter. India is aiming for expansion of 9 percent to 9.5 percent in the five years to March 2017, Montek Singh Ahluwalia, deputy chairman of the nation’s Planning Commission, said on April 21.

“Asia and emerging markets are going to be a better play in the second half of the year,” Komal Sri-Kumar, the chief global strategist at TCW Group Inc., said in an interview with Bloomberg Television from Los Angeles today. “Both China and India are going to stabilize. At some point, by the middle of this year, we’ll see the end of monetary tightening by Asian central banks. That will be very positive.”

Bull Market

China has raised interest rates four times since October and India eight times since early 2010 to curb inflation. The Reserve Bank of India’s policy announcement is due on May 3.

MSCI’s emerging-markets index climbed 0.3 percent to 1,204.59 as of 1:34 p.m. New York time. The MSCI World Index of developed nations also rose 0.3 percent.

Emerging funds have attracted $13.8 billion in the past five weeks, regaining about 50 percent of outflows in the previous nine weeks, according to a report yesterday by analysts at Citigroup Inc., citing EPFR data. Inflation in Asia will peak in the middle of this year, Citigroup’s Kelly Kwok said in a phone interview from Hong Kong today.

The best places to capitalize on a global bull market are Brazil, Russia, India and China, while “there are lots of opportunities,” in so-called frontier markets such as Vietnam, Bangladesh and Pakistan, Templeton Asset Management’s Mark Mobius said on April 27. Investors diversifying away from U.S. Treasuries have helped emerging markets, he said.

Ben S. Bernanke, chairman of the U.S. Federal Reserve, signaled on April 27 the central bank will maintain its record monetary stimulus following its decision to leave its benchmark interest rate in a range of zero to 0.25 percent, where it’s been since December 2008.

“Dovish comments from Bernanke suggest that there will be some time for rate hikes,” Citigroup’s Kwok said. “That will give some support to risk assets such as the emerging markets.”

To contact the reporters on this story: Shiyin Chen in Singapore at schen37@bloomberg.net; Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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