June 18, 2018 / 10:17 AM / 6 months ago

Outflows from dedicated global EM funds at 1-1/2 yr high

LONDON, June 18 (Reuters) - Outflows from dedicated global emerging market funds hit $2.2 billion in the week ending June 13, their biggest weekly leakage since the U.S. elections in November 2016, according to a UBS note citing EPFR Global fund flows data.

These redemptions drove an acceleration in overall outflows from global emerging market equity funds tallying up to $1.3 billion. Emerging debt funds also lost $1.3 billion.

EPFR Global said that both emerging equity and debt funds had extended their longest run of outflows since the fourth quarter of 2016.

Investor sentiment towards riskier emerging markets has soured at the prospect of U.S. Federal Reserve raising rates faster than expected, putting pressure on those emerging countries with high external borrowing requirements.

At the same time, investors are worried that the risk of a trade war is rising given the imposition of tariffs by the United States and China, which is likely to impact emerging market exports and global growth.

In an analysis of the fund flows data collected by EPFR Global last week, UBS noted that EMEA funds lost $146 million and Latin America funds $23 million. In contrast, Asia ex-Japan funds enjoyed a second straight week of inflows, with $1.05 billion.

“Only three out of the 24 MSCI EM markets saw inflows, led by over $900 million into Taiwan and Korea combined and a further $90 million into Turkey,” UBS analysts said, noting it was a 12-month high for Taiwan.

India, China, Russia and South Africa reported the largest outflows, totalling $1.3 billion.

EPFR Global said that South Africa’s reform story, which had helped South Africa equity funds post inflows in 11 of the first quarter’s 13 weeks, had taken a back seat to currency weakness and underwhelming macroeconomic data.

In an analysis of the split between mutual funds and exchange traded funds (ETFs), UBS noted that non-ETFs lost $873 million, nearly double the ETF redemptions of $462 million.

Meanwhile, the inflows into Asia ex-Japan were entirely due to ETFs, which attracted $1.2 billion, with the regional non-ETFs seeing outflows of $174 million. (Reporting by Claire Milhench Editing by Gareth Jones)

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