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Emerging market inflow up as risk appetite grow – EPFR

Posted on: March 29, 2009


Reuters – Saturday, March 28

* Global emerging mkt equity funds record $2 bln inflows

* Emerging market bond funds post 1st inflow in 11 weeks

* Inflows to high-yield bond funds 2nd largest this year

By Walter Brandimarte

NEW YORK, March 27 – Rising appetite for risk encouraged investors to move considerable amounts of cash into emerging-market equity and high-yield bond funds during the past week, EPFR Global data showed on Friday.

Emerging-market bond funds also recorded inflows for the first time in 11 weeks on hopes financial markets have finally reached bottom after the U.S. Treasury unveiled a much-awaited plan to rid banks of up to $1 trillion in toxic assets.

“I think the biggest single event (triggering the spike in risk appetite) was that the U.S. government finally came out with the plan that everyone had been waiting for them to come out with,” said Cameron Brandt, global markets analyst with EPFR Global, which tracks the flow of investment funds.

Global emerging-market equity funds recorded net inflows of nearly $2 billion in the week to March 25, their best weekly performance of the year.

Emerging-market bond funds received a net $15.83 million in the same period, the first inflows since the week to Jan. 7.

High-yield bond funds, another key barometer of risk appetite, took in $836 million in the March 19-25 period, their second best week of the year in terms of inflows.

Investor appetite for risk has been gradually increasing during the past three weeks, after another sell-off rocked global markets in most of January and February.

Bets that global markets have bottomed grew considerably in the past few days, however, as investors hope the U.S. plan to clean up banks’ balance sheets may represent a turnaround for the economy.

“People are looking for any credible evidence that it is time to plunge back in,” Brandt said, adding that the fact that emerging markets are receiving a healthy dose of the money currently on the sidelines is not surprising.

“Even though the decoupling theory was taken too far, too fast, the underlying premise that a lot of those emerging markets had much better fiscal profiles than developed ones still stands,” he said.

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