Investors pulled a record amount of money from emerging-market stock funds this week as rising global borrowing costs and MSCI Inc.’s decision to hold off on adding China’s yuan-denominated shares in its indexes weighed on investor sentiment, according to Barclays Plc. and EPFR Global.
Funds posted $9.2 billion of outflows in the seven days through Wednesday, $6.8 billion of which was from those investing in China, Barclays said in a research note, citing EPFR data. Traders have pulled $26 billion from emerging-market funds this year, surpassing the total of $24 billion in all of 2014, the data show.
The MSCI Emerging Markets Index declined for 12 straight days through June 9, the longest losing streak since 1990, amid concern rising borrowing costs in Germany and the U.S. will lure capital away from developing nations. MSCI said Tuesday that it will work with Chinese regulators to sort out some issues about market access before adding local shares to its emerging-market benchmark, disappointing some investors looking for an immediate inclusion.
“We are cautious about the asset class,” Morgan Harting, a senior portfolio manager who helps oversee about $474 billion at AllianceBernstein Holding LP, said by phone from New York. “The focus is on the rise of global rates. Investors are re-pricing risky assets. There are certainly reasons to be skeptical to a broader emerging-market rally, although they are cheap.”
Investors also withdrew $500 million from emerging-market foreign-currency bond funds and $320 million from local-currency funds during the week, according to the Barclays note.
Global government bonds tumbled over the past few weeks, dampening demand for higher-yielding assets, on concern that the economic recovery may push up inflation.
The emerging-market stock gauge headed for a fourth straight weekly decline, sliding 0.2 percent since June 5 as of 11:57 a.m. in New York. Yields on emerging-market local currency bonds rose to 6.8 percent on June 8, the highest since December, according to data compiled by JPMorgan Chase & Co.