Bleeding from emerging market equity funds comes to abrupt halt

LONDON, March 28 Fri Mar 28, 2014 9:41am EDT

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LONDON, March 28 (Reuters) - The heavy outflow from emerging market equity funds all but ceased in the last week data from EPFR Global showed on Friday, a sudden halt that boosted hopes the recent pounding of EM assets may be abating.

Dedicated emerging equity funds saw outflows of just $0.05 billion globally in the week to March 26, according to the figures, which are released to clients late on Thursday.

Technically the tiny change notched up a 22nd straight week of losses but it marked a major turnaround from investors which have yanked around $40 billion out of emerging markets so far this year.

EM Exchange Traded Funds (ETF) reported their first inflow week since November last year and Latin American and EMEA funds also logged small gains for the week.

The shift in the data also dovetailed with a visible rally emerging markets over the last couple of weeks.

EM stocks were set for their biggest weekly rise in nine months on Friday as calm in Crimea and reports that China would fast track infrastructure spending helped repair some of the damage done by the turbulent start to the year.

"The shift (in flows) was abrupt and mirrors a recent firming of EM equity prices," said Koon Chow an emerging market economist at Barclays in London.

"Both the flows and price action may be due to market expectations of more aggressive counter-cyclical policies in China, to arrest the deterioration of growth signaled by the recent PMI data."

It wasn't all one way traffic however. Dedicated EM bond funds reported outflows of $1.07 billion for the week continuing an only occasional broken trend which has spanned almost a year.

Developed markets, which have seen massive inflows over the last six months as economies such as the United States, the UK and the even the euro zone have started to gather strength, saw outflows of $8.2 billion, with $9.05 billion exiting the U.S.

At the country level for equities Russia, Chile and Greece witnessed the largest inflows as a percentage of Assets Under Management. (Reporting by Marc Jones; Editing by Toby Chopra)

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