Inflows into emerging markets continue to see an uptrend in the current year as well. The United States-based EmergingPortfolio.com Fund Research, which tracks investment in emerging markets, has reported new inflows of $351 million in the first week of 2004.
Of this amount, $127 million was placed with two India equity funds, the Pictet Funds Indian Equity Fund and the HSBC GIF Indian Equity Fund, proving that Indian equities are maintaining their attractiveness in the new year as well.
EPFR looked at the 961 dedicated emerging market equity funds with $122.5 billion in assets, including Global Emerging Market (GEM), Asia (excluding Japan), Latin America, and Europe/Middle East/Africa (EMEA) equity funds.
There was some churning in portfolios as investors withdrew $125.2 million from GEM Funds in the week ending January 7. But they invested a fresh $65.7 million in Latin American equity funds and $58.5 million in funds investing in Emerging Europe, Middle East and Africa (EMEA).
Asia (excluding Japan) was the biggest beneficiary of this realignment with as much as $351 million flowing into these funds.
The dedicated emerging market equity and fixed-income funds tracked by EPFR pumped a total of $12.5 billion of new money into Asian (excluding Japan) funds in 2003.
That represents a 17 per cent increase in assets from the beginning of this year owing to inflows. Emerging market equity funds, thus, have surpassed the previous record set in 1996, when there were inflows of $10.89 billion.
Inflows into these funds actually accelerated as the year ended. The $1.3 billion of fresh money contributed to these funds in the last two weeks of the year were the best bi-weekly period for fund flows in all of 2003.
"Investors injected record setting amounts of fresh money into emerging market funds in 2003 owing to a number of factors, including the fact that it was the fourth consecutive year of emerging markets outperformance of developed markets the MSCI (Morgan Stanley Capital International) EMF finished the year up 52 per cent year to date compared to the MSCI World Index's 31 per cent return," EPFR said in its latest report.
"Emerging markets are highly cyclical and are regarded by portfolio investors as a leveraged play on global economic recovery, especially as monetary policy has eased and economies are enjoying domestically driven growth throughout the emerging markets world," Brad Durham, managing director of EPFR, said in the report.
"You get stronger economic growth, lower equity valuations, and substantial earnings growth in the emerging markets universe. Asia's fiscal and current account surpluses have impressed investors, Brazil's pension and tax reform have led to anticipation of sharp growth in 2004, and rising commodities prices have been supportive of emerging markets performance and fund inflows," EPFR's Durham added.
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