Emerging market equity funds witnessed their biggest weekly redemption since early September, primarily due to Italy’s inconclusive election and the Cyprus bank bailout, a report says.
According to the data complied by the international fund tracking firm EPFR, the outflow from emerging market equity funds during the week ended March 28, jumped to a 29 week high heading into the final days of March.
Fund flows largely reflected the uncertainty created by the latest crises - Italy’s inconclusive election and the Cyprus bank bailout - to rattle the Eurozone.
“With the messy end-game of the Cyprus bailout dealing a blow to the notion that the worst may be over for the Eurozone and fuelling fears of similar events in Slovenia or Hungary, redemption from EPFR Global-tracked Emerging Markets Equity Funds jumped to a 29 week high,” EPFR said.
These funds (emerging market equity funds) are also under pressure from the spectre of a currency war triggered by Japan’s latest policies, uncertainty about China’s new leadership, softer commodity prices and concerns that rising inflation in key markets will limit options for easing monetary policy, it added.
Funds dedicated to Russia, which is exposed to declining commodity prices and the Eurozone crisis and is facing high inflation, had their worst week since the third quarter of 2011, while Emerging Europe Equity Funds saw over $100 million pulled out for the second week running.
In contrast, events in Europe during the fourth week of March did nothing to diminish the attractions of the US economy and Japan’s bold policy shift, with flows into US, Global and Japan Equity Funds.
The EPFR Global-tracked Developed Markets Equity Funds collectively posted inflows for the 16th time in the past 18 weeks.
US Equity Funds took in fresh money for the fourth consecutive week, their longest inflow streak since the fourth quarter of 2011.
The diversified Global Equity Funds also extended their winning run as YTD (year to date) inflows crossed the $38 billion mark, the report added.