Citi: Investor Love For Emerging Markets Disintegrates As Redemptions Soar


Investors’ 2009 love affair with emerging markets is at risk of ending fast. All it took was renewed financial crisis fears (this time in Europe) and a few weeks of stock market losses. Fund outflows from emerging markets funds surged to their highest level since August 2009:


Citi: The increased risk aversion triggered by fiscal fears in Europe and hence a stronger dollar has led to widespread redemptions from emerging market equity funds. In the week ended Feb 3, net outflows from all EM funds totaled US$1.6bn, which was the largest since late August. GEM funds, the category took in the most new money last year, saw outflows rise to a 13-m high. Although Asian fund outflows were 47% less than those for GEM funds, at US$517m, they were the largest in five months.

We can see that funds for the hot economies of China and India have been hit especially hard with redemptions:
[image url="" link="lightbox" caption="" source="" alt="weekly flows" align="left" size="xlarge" nocrop="true" clear="true"]
For emerging markets overall, the sudden change of fund flow has been short and sharp. Investor love is indeed fleeting:
[image url="" link="lightbox" caption="" source="" alt="global emerging" align="left" size="xlarge" nocrop="true" clear="true"]
(Via Citi, Fun With Flows, Elaine Chu, 8 Feb 2010.)

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