Emerging Stock Funds Draw Biggest Weekly Flows Since April, Citigroup Says

Emerging-market equity funds posted the largest weekly inflows since early April as investors were lured by declining valuations, according to Citigroup Inc.

Funds investing in developing-nation stocks attracted $3.5 billion in the week ended Nov. 2, a third consecutive week of inflows, Citigroup analyst Markus Rosgen wrote in a report today, citing figures compiled by EPFR Global.

“The strength of equity flows may suggest that long-term investors began to notice the attractive valuations of emerging equities,” said Kelly Kwok, one of the analysts in the Citigroup report, wrote in an e-mail.

Companies in the MSCI Emerging Markets Index of developing companies trade at 10.5 times estimated earnings, less than the four-year average multiple of 12.2, according to data compiled by Bloomberg. The gauge has rallied 19 percent since slumping to a 25-month low on Oct. 4, paring this year’s loss to 14 percent.

Exchange-traded funds for emerging markets posted their largest inflows in 12 months in October, signaling equities in developing nations would extend rallies at least through year- end, TrimTabs Investment Research Inc. said in an e-mail on Oct. 31.

Greek Vote

The MSCI Emerging Markets Index rose 1.8 percent to 991.39 at 10:03 a.m. Singapore time, trimming a weekly loss to 1.9 percent, after Greek Finance Minister Evangelos Venizelos said the nation won’t hold a referendum to vote on its latest financial rescue. Greek Prime Minister George Papandreou triggered a two-day rout in global stocks earlier this week after saying he wanted voters to decide on the country’s bailout.

Funds focused on emerging-market bonds received $671 million of inflows for the week ended Nov. 2, according to a report from Barclays Capital, citing EPFR data. Dollar- denominated securities attracted most of the money, with inflows of $519.9 million, compared with $19.5 million a week earlier.

Hong Kong and China were the “key winners of flows” in the region, according to the Citigroup report. In China, an index of manufacturers’ input costs fell the most in 17 months in October, giving Premier Wen Jiabao more room to loosen fiscal and monetary policies as the economy cools and Europe’s sovereign-debt crisis threatens exports.

To contact the reporter on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net;

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

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