2017 Emerging Market Inflows At Post-2006 Peak

Data Points To Seventh Straight Week Of Strong Inflows

According to EPFR Global, flows into global emerging market funds (GEMs) are currently averaging $2billion and more.

GEM equity funds received $2.4 billion of inflows last week after $1.87 billion and $954 million in the prior two weeks; this was the seventh consecutive week of inflows (totaling $14.5 billion). In net terms, all of the past week’s inflows went to dedicated GEM funds ($2.4 billionn), a 17th consecutive week of inflows.

By region, small inflows to Asia ex-Japan funds ($174 million) nearly offset (even smaller) outflows from Latin America (-$124million) and EMEA funds (-$73 million).

Looking at specific countries, India and China reported the largest inflows for a third week in a row, followed by Taiwan, Korea and Brazil. Both ETF and LO funds are also enjoying the inflow streak Last week, GEM ETFs saw inflows of $1.4 billion – double the inflow of $715 million a week earlier – while inflows into long only (LO) funds slowed slightly to $948mm (vs $1.16 million in the prior week).

Since the start of the year ETFs ($15.9 billion, 6%/of assets under management) have seen significantly larger inflows than LOs ($4.5 billion, at 0.8%/AUM). “However, the distribution of flows between the two types of funds during the current inflow streak has become relatively more favorable for LOs, which account for over one-third of the $14.5 billion of inflows in the past seven weeks,” Geoff Dennis, strategist with investment bank UBS wrote in a note to clients on May 5th.

2017 Year-To-Date Inflows Exceed $20 billion (2.5%/AUM)

The current seven-week inflow spurt has lifted year-to-date cumulative inflows to $20.4 billion – the highest level for the first 18 weeks of the year since our data began in 2006 (Figure 2). These strong inflows have been almost entirely driven by flows to dedicated GEM funds ($23.9 billion, 5.5%/AUM).

Emerging market countries except Korea have seen year-to-date inflows, with 85% of the flow being absorbed by the BRICS plus Taiwan. Brazil and South Africa appear increasingly crowded–Brazil jumped two places in UBS’s positioning model rank to become the fourth most crowded emerging market. South Africa, Malaysia, Indonesia, Chile, Czech Republic and Colombia also became relatively more crowded while Qatar and Peru now appear less crowded.

“According to our flow-based model, the most crowded big markets are China, Brazil and South Africa. Korea, India, Taiwan and Russia are on the other side of the ledger,” Dennis said.

Charts: Institute of International Finance (IIF).