Emerging-market equity funds posted $8.7 billion of outflows in the second quarter as the European debt crisis pushed Spain’s borrowing costs to a record and concerns grew that the economic slowdown in China is deepening.
Flows out of developing-nation stock funds reached $262 million in the week ended June 27, narrowing inflows this year to $14 billion, analysts led by Markus Rosgen wrote in a report today, citing data compiled by EPFR Global.
“The renewed problems of Greece and potential contagion risk to other parts of the Euro-area, such as the Spanish bank liquidity concern, along with a batch of poor economic data, particularly in China, have surely weighed on the equity markets and fund flows in the second quarter,” Kelly Kwok, one of the Citigroup analysts, said in an e-mailed interview.
The MSCI Emerging Markets Index (MXEF) has fallen 12 percent since the end of March, poised for the biggest quarterly loss since the three months to Sept. 30. The emerging markets index trades at 10 times estimated profit, compared with 12 times for the MSCI World Index of developed nations, according to data compiled by Bloomberg.
The developing-nations gauge jumped 1.2 percent to 917.78 as of 11:47 a.m. in Hong Kong after Euro-area leaders agreed to drop a condition that emergency loans to Spanish banks give their governments preferred creditor status.
Europe’s debt crisis has hurt the outlook for shipments to the region from developing nations. The 21 countries in the MSCI Emerging-Markets Index send about 30 percent of their exports to the European Union on average, data compiled by the World Trade Organization show. Brazil, Russia, India and China, the four largest emerging markets, count the EU as their largest export destinations, the WTO data show.
Chinese Industrial Profits
Russia’s RTS Index has tumbled 22 percent this quarter, the most of the four markets. Brazil’s Bovespa Index is the next worst with an 18 percent slump. China’s Shanghai Composite Index lost 2.3 percent, including a 6.8 percent drop in June.
Chinese industrial companies’ profits declined for a second month in May, a government report showed today, as slowing economic growth hurt corporate earnings. The China Federation of Logistics and Purchasing may report on July 1 that the Purchasing Managers’ Index dropped to 49.9 this month, falling below the dividing line of 50 for expansion and contraction, according to the median estimate of 19 economists in a Bloomberg survey.
-- Editors: Allen Wan, Darren Boey
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