July 22, 2016 / 7:17 AM / 2 years ago

Emerging bond fund inflows hit new weekly record high-JPM

LONDON, July 22 (Reuters) - Flows into emerging market bond funds set a new record high of $4.7 billion in the past week, and combined equity and debt inflows were the second highest on record, JPMorgan said on Friday.

The bumper inflows come despite a revival in expectations for a U.S. rate rise this year and a failed July 15 coup in Turkey which has resulted in a government crackdown and massive selloff in local markets.

“The surge in retail demand for emerging markets continues to strengthen with another solid week of subscriptions,” JPM, which runs the most widely used emerging debt indexes, told clients.

JPM said the past week’s bond inflow had surpassed the previous record of $3.3 billion set two weeks ago, which was the highest since it started tracking the data in 2004. This has taken cumulative flows to emerging debt to $19.9 billion.

The sector posted outflows of $14.4 billion in 2015.

However, investors have not fully embraced risk, according to the data, which shows hard currency emerging bond funds have taken the lion’s share of investment this year at $20.3 billion. The more volatile local currency debt remains in the red, with net year-to-date outflows of $400 million.

Flows to emerging equity funds, so far less in favour than bonds, are also picking up. These received $5.5 billion, the largest weekly inflow since early-2013, of which passive exchange-traded funds absorbed $4.1 billion.

JPM added however that year-to-date, emerging stocks had posted outflows of $3.7 billion.

Combined emerging market bond and equity retail inflows were the second largest on record, at $10.2 billion, and the largest since January 2013, the bank said.

Reporting by Sujata Rao; Editing by Andrew Heavens

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