Emerging Market Funds See Outflows; China, Turkey Smarting

Emerging market equity funds recorded outflows for a third consecutive week, with big redemptions from China and Korea during the week ending March 25, according to EPFR Global.

This week, shares in Brazil and India were among the biggest losers, while stocks in Nigeria and Greece produced no-news-is-good-news rallies. EPFR Global noted that investors unloaded Turkey equity funds for the eighth week, with the benefits of cheap oil and a competitive currency seen earlier this year “overshadowed by the volatility of Turkey’s currency and the recent tension between the government and central bank over monetary policy.” Redemptions from Latin America stock funds fell to a five-week low, EPFR writes, adding:

The latest outflows from China Equity Funds were broadly based and came during a week when data showed that Chinese manufacturers continue to struggle and that Chinese banks are wrestling with an increase in non-performing loans. Managers of diversified fund groups appear, however, to be less worried that investors. The latest allocations data show average China weightings for GEM Equity Funds are just shy of the record high they hit in January and, for Asia ex-Japan Equity Funds, are at levels last seen in the fourth quarter of 2010. Vietnam equity funds were hit hardest among all emerging market country fund groups in flows as a percentage of assets under management. Although the country is growing at a 6% clip thanks in part to solid levels of direct foreign investment, its frontier market asset class has slipped out of favor with mutual fund investors after two strong years. Frontier Markets Funds have now posted outflows for six consecutive weeks, their worst run since the third quarter of 2012.

Emerging market bond funds have snapped two weeks of outflows, as angst over the U.S. Federal Reserve’s mid-March meeting subsides, EPFR notes. The Western Asset Emerging Markets Income Fund (EMD) rose 2% in the week that was, while the SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF (EMCD) fell 0.6%. The largest developing market bond ETF, the iShares JPMorgan USD Emerging Markets Bond ETF (EMB) was up 0.2%

For the week, the Vanguard MSCI Emerging Markets ETF (VWO) and the iShares MSCI Emerging Markets ETF (EEM) each fell 1.6%. In comparison, funds focused on Nigeria, China, Greece and Chile outperformed. Here are some of the significant moves in emerging market funds this week. First the winners:

The Global X MSCI Nigeria ETF (NGE) rose 6.5%.

The iShares MSCI Chile Capped ETF (ECH) rose 1.7%.

The Market Vectors China ETF (PEK) rose 1.5%.

The Global X FTSE Greece 20 ETF (GREK) rose 1.4%.

Among funds that slipped lower, underperforming the broader trend in emerging markets:

The GlobalX MSCI Argentina ETF (ARGT) fell 4%.

The iShares MSCI Brazil Capped ETF (EWZ) fell 4%.

The iShares MSCI Turkey ETF (TUR) fell 3.3%.

The iShares India 50 ETF (INDY) fell 2.9%.

The Market Vectors Egypt ETF (EGPT) fell 2.9%.

The Market Vectors Russia ETF (RSX) fell 1.6%.