Less than two months into the year, global investors pulled more money out of emerging-market stock and bond funds than the total amount they retracted last year.
Investors withdrew US$4.5 billion from funds in the week through Wednesday, extending the total outflow this year to US$29.7 billion, according to Barclays PLC, which cited data provider EPFR Global. Last year, a total of US$29.2 billion left funds investing in emerging-market assets.
Capital outflows are showing no signs of abating even as stocks and currencies from developing nations rose this month following the biggest equity losses in January since 2009.
While investors including BlackRock Inc’s Larry Fink say emerging-market assets are cheap, concerns about slowing growth in China, trade deficits in Turkey and the US Federal Reserve’s reduction of stimulus are weighing on investor sentiment.
“The fund flows data for EM [emerging markets] remain negative, with retail-type investors leading the exit and recently joined by more visible institutional-type investor selling from equities,” London-based Barclays head of emerging-market strategy Koon Chow wrote in an e-mailed note yesterday. “The turning point for EM will probably be when investors become more positive on EM growth, particularly in Asia.”
Investors pulled US$3.1 billion out of emerging-market stock funds during the week, extending total outflows this year to US$21.7 billion, Barclays said.
Outflows from bond funds amounted to US$1.4 billion in the week and US$8 billion for the year.
The MSCI Emerging Markets Index of stocks has gained 2.3 percent this month, following a 6.6 percent decline last month, as Turkey’s interest-rate increases stemmed a currency rout and China’s exports beat economists forecast. Local-currency bonds returned 2.3 percent in US dollar terms after losing 4.6 percent last month, according to JPMorgan Chase & Co’s GBI-EM Diversified index.
BlackRock’s Fink, whose firm is the world’s largest money manager with US$4.3 trillion, said in an interview with Charlie Rose on Tuesday that developing-nation equities are attractive. The MSCI benchmark traded 9.3 times projected 12-month earnings on Feb. 4, compared with a multiple of 14.7 for the MSCI World Index of developed-country equities.
Short sellers are increasing their bets that emerging- market stocks will extend the decline, according to Markit, a London-based financial data provider.
Short interests in the companies in the MSCI benchmark increased 7 percent this year to 2.1 percent of the total free floating shares, Markit said in a note on Friday.
In short selling, investors borrow shares and sell them on expectations they will fall.
About 4.5 percent of Chinese shares are on loan, the most shorted in the MSCI index, followed by South Africa, which has 4.3 percent, according to Markit.
In the bond market, demand from insurance companies, pension funds and sovereign wealth funds remains intact even as individual investors retreat, Bank of America Corp said.
Purchases from institutional investors helped developing-country companies and governments raise US$67 billion in US dollar-bond sales this year, strategists led by Jane Brauer wrote in a note yesterday.
Foreign investors also boosted their holdings of local- currency bonds by 7 percent between July and December last year, Brauer said.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is