Second straight inflow week for EM equity funds -banks, citing EPFR

Reuters

LONDON (Reuters) - Emerging equity funds have enjoyed their second consecutive week of inflows while hard currency bond funds also posted gains for the first time since mid-May, banks said on Friday, citing data from EPFR Global.

The Boston-based fund tracker releases data to clients late on Thursday. Banks said it found that $1.65 billion had flowed to emerging equity funds in the week to September 18, very likely benefiting from immediate inflows after the U.S. Federal Reserve decision on Wednesday to keep money-printing on course.

The postponement of the so-called tapering has given a big lift to emerging assets, with currencies rallying against the dollar while equities have risen 2 percent since the decision.

The gains snap a 15-week losing streak for emerging stocks. During this period they had shed $36.4 billion or 4.6 percent of assets under management, banks said.

Developed equity funds shared the success, absorbing $24.3 billion in the past week.

Emerging bond funds meanwhile lost more ground, shedding a total $288 million for their 17th straight loss-making week. But outflows declined to a quarter of the previous week's $1.2 billion, banks noted.

The headline figure also masks $80 million received by hard currency bond funds, though this was offset by $357 million outflows from funds dedicated to emerging local currency bonds.

Inflows could pick up in coming weeks, however, after the Fed decision. JPMorgan advised clients to raise allocation to emerging debt, suggesting an overweight position on hard currency bonds and marketweight, or neutral, on corporate debt.

The bank had so far recommended staying neutral and underweight respectively.

While year-to-date returns on emerging debt are deep in the red, JPMorgan also told clients: "We see the possibility of 1.4-2.4 percent total returns from here to year-end ... The picture in local markets is equally positive."

(Reporting by Sujata Rao; Editing by Catherine Evans)

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