Emerging market outflows nearly double in past week-banks, citing EPFR data

LONDON Fri Aug 30, 2013 4:41am EDT

LONDON Aug 30 (Reuters) - The exodus from emerging markets accelerated over the past week, with bond and equity funds suffering net outflows of almost $6 billion, nearly double the previous week's losses.

Investment banks said on Friday the data came from Boston-based fund tracker EPFR Global in its weekly report to clients.

It showed net outflows from emerging bond funds stood at $ 2.01 billion in the week to August 28, picking up from the previous week's $1.3 billion, banks said.

Emerging equity funds posted net outflows of $3.9 billion, banks cited the data as showing, more than double the previous week's $1.7 billion.

Bonds denominated in emerging market currencies were particularly hard hit, as currencies such as the Turkish lira and Indonesian rupiah, both previously investor favourites, fell sharply against the dollar. Such funds shed $1.1 billion net.

"The weak performance in the local currency bond front continues to be indicative of a very nervous redemption dynamics among real money investors," Citi analysts said in a note.

"Not a 'fire sale' yet, but definitely getting heavy as we get close to the (September U.S. Federal Reserve) meeting."

Emerging markets have witnessed heavy losses since May as investor conviction grew that the Fed is set to start reeling it some of its $85 billion-a-month stimulus, possibly to begin at its September meeting. Some of these cheap dollars had found their way in recent years to emerging bond and stock funds which took in a cumulative $90 billion in 2012.

The outflows bring net year-to-date losses for emerging stocks to almost $5 billion while bond funds' takings are flat on the year, according to EPFR.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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