INVESTMENT FOCUS-Pickings for the brave in emerging markets

jueves 17 de abril de 2014 10:04 GYT

By Carolyn Cohn and Natsuko Waki

LONDON, April 17 (Reuters) - The brave few who waded back into emerging markets in March reaped substantial rewards, but investors say it is too soon to tell whether the recent bounce will become a sustained rally.

After three years of underperformance had left them at rock-bottom valuations, emerging markets enjoyed a surge in the early days of the northern spring.

Sovereign debt spreads closed to their narrowest over U.S. Treasuries since May 2013 - just before then-Federal Reserve Chairman Ben Bernanke hinted the Fed would scale back its monetary stimulus, frightening investors in risky assets.

After falling 5 percent in 2013, emerging stocks bounced 9 percent and moved into the black for 2014. Now they are beating developed-world stocks.

Emerging market equity funds saw their biggest inflow in over a year last week, according to Boston-based fund tracker EPFR. Banks such as Barclays, Citi, HSBC, Morgan Stanley and Societe Generale started to recommend buying emerging markets by the beginning of this month.

"Performance has been particularly good in the very short term," said Iain Stealey, who manages global bond strategies at JPMorgan Asset Management and has been adding emerging debt positions since the start of the year, though he also said that "volatility is going to be quite high".

Not everyone took advantage of the rebound. The average allocation to emerging markets by international equity funds rose marginally in February, according to Lipper data - to 10.7 percent from 10.15 percent. Only four funds raised exposure to emerging markets by 2 percentage points or more over that time, Lipper's most recent data show.

But a Bank of America-Merrill Lynch survey showed investors cut their extreme bets against emerging markets in April, suggesting many more investors have latched on to the trend.   Continuación...