Momentum for emerging markets (
EEM
,
quote
) is continuing -- and QE never hurts fund flows.
[caption id="attachment_69956" align="alignright" width="300"
caption="Early morning mist in Bolu province, Turkey"]
[/caption]
Markets that look most overdone include Turkey, whose rally into
investment grade is very long in the tooth.
South Africa faces near term headwinds on currency weakness
which is feeding CPI pressures, this has been a major overweight
market and seeing rotation. Russia is poised for a strong fourth
quarter, while India and China remain the major opportunities at
the margin.
The China move in the last month was solid, but it is far from
done.
UBS investment research
notes that net buying continues for all regional funds except EMEA
(Europe, the Middle East, and Africa).
Emerging market funds saw inflows of $1.455 billion last week
versus moderate inflows of $795 million in the prior week.
- ETF funds saw strong inflows of $1.29 billion versus non-ETF
fund inflows of $165 million.
- Investor positioning decreased in South Africa, Turkey,
Indonesia, Taiwan, Russia, and India.
- The most crowded markets are: South Africa, Colombia,
Philippines, Thailand and Turkey.
- The least crowded markets are: CE3 (central and eastern
European countries Poland, Hungary, and the Czech Republic),
Morocco, India and China.
- Total emerging markets funds have benefited from $25.4
billion of inflows this year compared to a $34.2 billion
withdrawal suffered in 2011. On a cumulative basis, $163
billion has flowed into emerging markets funds since January
2006.
Asia excluding Japan and Latin America saw inflows for six
consecutive weeks. On a four-week moving average basis, there have
been inflows of $310 million to dedicated emerging markets; inflows
of $495 million to Asia excluding Japan; inflows of $220 million to
Latin America; and inflows of $30 million to EMEA.
Non-ETF funds remain on the sidelines.
On a 4-WMA basis, ETF funds have seen inflows of $810 million
versus inflows of $245 million for non-ETF funds. Year-to-date,
ETFs represent 69% of the total fund pool, up from an average of
44% since 2005.
