Flows to EPFR-tracked Emerging Markets Equity Funds accelerated during the third week of April, despite retail support evaporating, as oil prices challenged the $70 a barrel mark and industrial commodity prices surged. All four of the major regional groups attracted fresh money, with Asia ex-Japan Equity Funds recording the biggest inflows in cash terms and Latin America Equity Funds inflows as a percent of assets under management terms. Dedicated Brazil, Russia, India and China Equity Funds posted their fourth consecutive inflows, something they last achieved in mid-1Q12.
The jump in energy and commodity prices bolstered the investment case for Russia and flows into Russia Equity Funds jumped to a 53-week high. Cheap valuations, decent fundamentals and the lack of escalation after the U.S., U.K. and France ignored Russian warnings and launched airstrikes against its allies in Syria also prompted investors to rebuild exposure to this market.
Higher oil prices should also benefit Mexico, which was already being re-rated as a likely winner if the U.S. and China really start to restrict each other’s trade. Mexico Equity Funds recorded their biggest inflow since mid-4Q16 while flows into funds dedicated to another regional oil play, Colombia, were the biggest in over seven months.
Among the Asia ex-Japan Country Funds, investor commitments to Vietnam and Malaysia Equity Funds hit 10- and 13-week highs, respectively, while China Equity Funds recorded their second largest inflow year-to-date despite a further drop in Chinese equity markets. The flows into China Equity Funds were broadly distributed—a dozen funds took in over $30 million apiece—and equally divided between yuan and foreign currency-denominated inflows.
Cameron Brandt is Director of Research for EPFR Global, an Informa Financial Intelligence company.
